Why shouldn't economics be used to enforce good behavior? (generation, ethics, death)
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Paul Krugman is a big basher of the moral aspect of market economics. Arguing against moral hazard is one of his main themes. A common argument of his is that government should go into debt to spend big on the people, regardless of whether this hurts savers and rewards spenders. In his mind all that matters is growth, and if you can use Keynesian policies to spur growth you should, and not mind how this may distort incentives or disadvantage those who acted responsibly.
I know it's hard to bootstrap morality for a lot of people, but I think that delayed gratification is demonstrably good. It is good because it minimizes suffering during lean times, exercises will power over base impulses, and produces a surplus that can be used to improve the world in a lasting way. Our market system rewards those who delay gratification, and this has always had a moral dimension to me.
The older I get and the more money I have at my disposal, the more I realize that working for "stuff" is stupid. I get so little happiness from buying things compared to the sense of accomplishment I have looking back on my career thus far. And to be honest I do enjoy schadenfreude looking at others' lives whom I grew up with, who often mocked me and others like me as "try hards" and generally square people. Now many of their careers have plateaued and they don't have many prospects.
I see market economics' number one goal not as the production of plenty, but as an enforcer of good behavior and social order. To me living in a society where spendthrifts go bankrupt and hard workers rise is more important than having cheap conveniences. To use econ speak, I get more utility from living in a world that morally "makes sense" than I do living in a world of cheap gadgets.
I see market economics' number one goal not as the production of plenty, but as an enforcer of good behavior and social order. To me living in a society where spendthrifts go bankrupt and hard workers rise is more important than having cheap conveniences. To use econ speak, I get more utility from living in a world that morally "makes sense" than I do living in a world of cheap gadgets.
So are you saying that for example we should use the economy and rules to force people to act responsibly? For example...what if instead of taxes we simply set the inheritance tax at 100% and made it harder to gift things to family members. It would cause those who worked hard to get ahead to succeed, while those who did not would no longer get massive inheritances that allowed them to never work. Would that be reasonable?
I kind of think it would to be honest. But its the kind of question that in my opinion would rapidly get to the heart of things.
So are you saying that for example we should use the economy and rules to force people to act responsibly? For example...what if instead of taxes we simply set the inheritance tax at 100% and made it harder to gift things to family members. It would cause those who worked hard to get ahead to succeed, while those who did not would no longer get massive inheritances that allowed them to never work. Would that be reasonable?
I kind of think it would to be honest. But its the kind of question that in my opinion would rapidly get to the heart of things.
I am not a big defender of inheritance, but I think you're ignoring the need for transgenerational incentives. A 100% estate tax would be destructive. A 0% estate tax is also bad. I think the estate tax in the US is too low now, but it is too high in other places.
If you know that all surplus you generate after a certain point will be taken and spent more wastefully by others, why would you keep on working? Of course your heirs could waste it too - there's always a risk. But you as a parent have more control over the behavior of a child than you do a government agency.
Saving shouldn't stop when you die. Saving is almost always a good thing, and we need more of it. Government spending will mostly go towards transfer payments to those who will consume the money. Whereas money in a trust is more likely to be invested rather than consumed.
Estates also allow behavior to be enforced longer than a human life span. If the slate is wiped clean at death, the consequences for bad choices are diminished, as are the rewards for good choices.
What happened to the free market narrative? Invisible hand......laissez-faire.....Adam Smith...
Classical liberalism is a pragmatic side effect of political stalemate. There's a lot to commend it, but politics and economics are also about values. Values ultimately undergird a lot of the society we live in. Pragmatism and hewing to necessity are not enough to live "the good life" in my opinion.
The "invisible hand" is BS. The hand is shaped by laws and ultimately our values.
I too am a saver, but I appreciate the spendthrifts. They keep my stock portfolio increasing. If everyone saved like I did, the economy would come to a screeching halt.
I too am a saver, but I appreciate the spendthrifts. They keep my stock portfolio increasing. If everyone saved like I did, the economy would come to a screeching halt.
I see this aspect but don't agree. It sets up an unhealthy class relationship.
My ideal society is the Jeffersonian ideal of self-sufficient yeoman. Not just yeoman farmers of course in this day and age, but a society in which everyone contributes some amount and there are few wastrels.
I am not a big defender of inheritance, but I think you're ignoring the need for transgenerational incentives. A 100% estate tax would be destructive. A 0% estate tax is also bad. I think the estate tax in the US is too low now, but it is too high in other places.
What level is a good level? I agree with you about this but possibly for different reasons. Should it be based on total value? Lets be honest here-even fairly small inheritances turns someone from being motivated as you discuss to not being motivated. a million dollars for example is more then some folks will make in their entire lives.
Quote:
If you know that all surplus you generate after a certain point will be taken and spent more wastefully by others, why would you keep on working? Of course your heirs could waste it too - there's always a risk. But you as a parent have more control over the behavior of a child than you do a government agency.
Didnt you just talk about avoiding the motive of being motivated by things? And as a parent of 8 kids, let me assure you-you have FAR less control of their behavior then you would hope.
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Saving shouldn't stop when you die. Saving is almost always a good thing, and we need more of it. Government spending will mostly go towards transfer payments to those who will consume the money. Whereas money in a trust is more likely to be invested rather than consumed.
Why? An consumed often means moved into the world via spending that will then be taken by those you paid and used more responsibly. I mean thats your point, even if its spent-those who get the money will be the ones deciding where it goes next. And giving some child millions via his accident of birth simply concentrates it and gives less opportunity to others. Thats part of the issue with growing inequality-the vast concentration of wealth reduces opportunity.
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Estates also allow behavior to be enforced longer than a human life span. If the slate is wiped clean at death, the consequences for bad choices are diminished, as are the rewards for good choices.
Companies that have stocks live longer then people. Estates of most sizes vanish shortly after the death of the owner. But the insanely large ones tend not too anymore as the value is simply given to people who cannot easily spend it all in their lifetime. You're making a argument from a "in perfect world" sort of place. One that doesnt reflect what occurs. Estates give benefit to someone who has not worked to earn them. period. If the estates are large enough they are often companies-and people would buy the stock in them, and hire a new CEO for example.
Again this assumes I understand the intent of your original post correctly, it seems to me that your argument against it works correctly for a very narrow band of inheritances. Too big and its unearned wealth that they truly do not deserve, and too small and its not a....how should I put this. Legacy? Does that fit what you are trying to say?
Classical liberalism is a pragmatic side effect of political stalemate. There's a lot to commend it, but politics and economics are also about values. Values ultimately undergird a lot of the society we live in. Pragmatism and hewing to necessity are not enough to live "the good life" in my opinion.
The "invisible hand" is BS. The hand is shaped by laws and ultimately our values.
Raw economics literally has nothing to do with values/morals/ethics.
Explain this sentence for us:
Quote:
Classical liberalism is a pragmatic side effect of political stalemate.
What level is a good level? I agree with you about this but possibly for different reasons. Should it be based on total value? Lets be honest here-even fairly small inheritances turns someone from being motivated as you discuss to not being motivated. a million dollars for example is more then some folks will make in their entire lives.
Didnt you just talk about avoiding the motive of being motivated by things? And as a parent of 8 kids, let me assure you-you have FAR less control of their behavior then you would hope.
Why? An consumed often means moved into the world via spending that will then be taken by those you paid and used more responsibly. I mean thats your point, even if its spent-those who get the money will be the ones deciding where it goes next. And giving some child millions via his accident of birth simply concentrates it and gives less opportunity to others. Thats part of the issue with growing inequality-the vast concentration of wealth reduces opportunity.
Companies that have stocks live longer then people. Estates of most sizes vanish shortly after the death of the owner. But the insanely large ones tend not too anymore as the value is simply given to people who cannot easily spend it all in their lifetime. You're making a argument from a "in perfect world" sort of place. One that doesnt reflect what occurs. Estates give benefit to someone who has not worked to earn them. period. If the estates are large enough they are often companies-and people would buy the stock in them, and hire a new CEO for example.
Again this assumes I understand the intent of your original post correctly, it seems to me that your argument against it works correctly for a very narrow band of inheritances. Too big and its unearned wealth that they truly do not deserve, and too small and its not a....how should I put this. Legacy? Does that fit what you are trying to say?
I don't know enough about the dynamics of inherited wealth and behavior to set the ideal level. I don't think you do either, and I find some of your descriptions of what happens to heirs to be too sweeping.
A lot of estates are investments in corporations. Some estates are corporations like family companies. I don't see why you're distinguishing between a corporation and an estate.
To make it clear, I believe that privately held estates are more likely to be invested than consumed compared to the collections of an estate tax. If the government were in the business of investing in a lot of infrastructure rather making transfer payments I would change my mind. But in the US that's not the case. I think investment is preferable to consumption, both pragmatically and as a personal value.
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