The Flawed Concept of "Wealth Redistribution"

Discussion in 'Economy' started by Rambunctious, Mar 7, 2010.

  1. Rambunctious
    Offline

    Rambunctious Gold Member

    Joined:
    Jan 19, 2010
    Messages:
    4,619
    Thanks Received:
    818
    Trophy Points:
    245
    Ratings:
    +2,995
    The Flawed Concept of "Wealth Redistribution"
    M40 - Thursday February 26th, 2009, 6:29pm

    Anyone who believes in "wealth redistribution" shows a complete and utter ignorance of how economics work. This applies at both the micro and macroeconomic scale. The fact that our president is a firm believer in “wealth redistribution” is a scary fact indeed. If you doubt this, listen to him talk about it here: [ame=http://www.youtube.com/watch?v=iivL4c_3pck]YouTube - Obama Bombshell Redistribution of Wealth Audio Uncovered[/ame]

    The premise of "wealth redistribution" is that it is unfair when one person has more wealth than another. However, this whole assessment of fairness is based on a faulty principle. That principle is called "zero sum economics", and it is a flawed assumption. Zero sum economics assumes that there is a fixed amount of wealth in the world, and that we all have to share it. If someone takes more than their share, then someone else has less as a result. If that were the case, then "wealth redistribution" might be a means to remedy that inequity. However, nothing could be further from the truth. There is NOT a fixed pile of "wealth" from which we all must share. Wealth is created, not taken from others.

    In the zero sum mindset, if I take an extra slice of pizza, then some unlucky asshole is left to gnaw on the box. There is no consideration for the fact that we can simply make another pizza, and have thus created "wealth". The pizza is worth 10 times what the raw ingredients were worth, and thus wealth is created from nothing. If you know someone who supports "wealth redistribution", ask them the following. Should artists be forced to sell paintings for the exact sum of the cost of the paint and canvas? The answer is (of course), no way! Well... where did that extra cost come from? It came from the artist’s skill, time and workmanship. The artist created a large amount of wealth from a couple dollars worth of materials.

    But some folks might argue that there's a fixed amount of dollars, pounds, (pick any currency) out there and that is what we are forced to share. Again, a FLAWED perception of reality, and an ignorance of how economics and currencies work. What is a dollar worth? It's worth a dollar of course... but what the fuck does that mean? Here's the secret... it means whatever you want it to mean.

    The dollar is a piece of paper that is sometimes worth a lot, and at other times isn't worth the paper it's printed on. The value of any currency is worth whatever people perceive it to be worth at that exact moment. It is only a "bearer instrument" used for trade and is based ENTIRELY on your trust in it’s value. If I'm selling bread, I might decide that my bread is worth a dollar per loaf. But the next day, I may decide it's worth two dollars a loaf. It's up to me what I charge, but it's also up to the BUYERS. If people decide that my bread tastes like ass, then suddenly my bread is worth precisely ZERO DOLLARS to me or anyone else. Therefore, the value of ANYTHING is... exactly what people are willing to spend on that thing!

    If I have a Snickers bar and someone offers me a dollar for it… SOLD. However, if I happen to be starving and the Snickers bar is the only food available, then that Snickers bar may be worth a hundred dollars… it may be worth a thousand dollars… or a million. The Snickers bar is the ‘wealth’, NOT the dollars. The dollars are only instruments used for trade, and like any trade, you as a buyer or seller need to weigh your perceived value of the item you’re trading and that which you’re trading it for.

    Paper money and coinage were invented to make trade easier for people. Let’s go back a few thousand years in history… before money. The tribal toolmaker shows up at the butcher’s place. He offers the butcher a nice stone knife for a choice cut of mutton. Well, the butcher may already have all the stone knives he needs, so… no deal. The toolmaker now needs to find out what the butcher needs, then find a person who has that and is willing to trade for stone tools! Why? No “currency” as a means of trade. But again, the currency is only valued based on what people are willing to pay. If there was starvation among the tribe’s people, then all the stone tools in the world aren’t worth a bite of mutton. Likewise, if the tribe has 27 butchers, but only one toolmaker, then decent stone blades are worth a LOT of meat.

    Because there's a fixed amount of DOLLARS out there, the value of a dollar therefore rises and falls based entirely on public perceptions. If we as a nation are busy little bees and produce lots of goods and services that the world actually wants, then the value of the dollar skyrockets. If we sit back and get fat and lazy, the value of the dollar plummets like a stone.

    So what if we simply make more dollars? Would we create wealth? HELL NO. Again... dollars do not equal wealth, they are merely the instruments used to trade wealth between people. Therefore, if Obama decides he'll print dollars like crazy to pay off the incredible debt he's saddled us with, then all he's doing is doubling the amount of dollars out there... but cutting their VALUE in half… or worse. The actual amount of wealth hasn't changed just because he directs the mint to make more trade instruments.

    Because of this, when governments don't understand basic economics, they make huge mistakes (like printing more money). Let's pretend you are a foolish little imbecile, and have your life savings (let's say $50,000) sitting in the bank. Obama decides tomorrow that it would be cool to simply print 10 trillion dollars in new bills and pay off all our debts. Your life savings would still amount to exactly $50,000. However, you might then need that $50,000 to buy a Big Mac combo meal.

    At about this point, you might think I'm exaggerating. However, history is rife with economies that collapsed into rampant inflation because they were run by idiots who knew nothing about economics. As soon as people begin to lose confidence in a currency, that currency loses all it’s value. It may as well be a pile of paper.

    Only our confidence keeps the system going. It’s the confidence that if we trade something for dollars, that we can then trade those dollars for something else of value. As soon as we lose that confidence, we end up with $10,000 Snickers bars
     
    • Thank You! Thank You! x 1
  2. rightwinger
    Online

    rightwinger Paid Messageboard Poster Gold Supporting Member Supporting Member

    Joined:
    Aug 4, 2009
    Messages:
    120,518
    Thanks Received:
    19,878
    Trophy Points:
    2,190
    Location:
    NJ & MD
    Ratings:
    +45,527
    We have been having a redistribution of wealth for the last 30 years as the top 5% of the population has benefited from relaxed tax and business regulations and the standard of living for the remaining 95% of the population has diminished

    I agree that the redistribution of wealth has been bad for the country
     
  3. slackjawed
    Offline

    slackjawed Self deported

    Joined:
    Sep 27, 2008
    Messages:
    5,307
    Thanks Received:
    645
    Trophy Points:
    98
    Location:
    15th congressional district of Arizona
    Ratings:
    +645
    i agree with you. I think our so-called leaders, with a very few exceptions, understand the economics of gathering funds for reelection, nothing more.
    It seems that most, not all-most, citizens understand the economics of "what am I going to get out of it."
    If a system of "wealth redistribution" becomes much more widespread than it has been in the recent past, there will be no wealth created. let's face it, we have been on a path of redistribution of wealth for some time, certainly for the last 40 years or so. The "great society" is nothing more than a thinly veiled system of wealth redistribution. I don't hate the poor, as I will certainly be accused of by stating that. The fact is, the redistribution of wealth in the form of welfare and food stamps does more to keep the poor, well, poor, than it does to help them.
    When the entire system of wealth redistribution takes hold, there will be no incentive to create wealth. How long will it take for there to be no 'wealth' to distribute?
     
    • Thank You! Thank You! x 1
  4. Foxfyre
    Offline

    Foxfyre Eternal optimist Gold Supporting Member Supporting Member

    Joined:
    Oct 11, 2007
    Messages:
    47,729
    Thanks Received:
    10,831
    Trophy Points:
    2,070
    Location:
    Desert Southwest USA
    Ratings:
    +14,479
    And here is where socialism breaks down.

    It is all too easy to feel smug and righteous that you help the shallow end of the pool by dipping water from the deep end and pouring it into the shallow end. But it doesn't help the shallow end. It still stays shallow once the levels re-establish themselves. And if no new water is being infused into the system, the entire pool will eventually dry up.

    Translating that into social dynamics, once we make the poor relatively comfortable and secure, there will be little incentive to change their situation and new infusion of wealth is unlikely to come from that sector.

    And the more we dip from the profits of the industrious and successful in order to keep the poor comfortable and secure, there is less incentive for the deep end to be industrious and successful.

    The pool might not dry up entirely for a very long time, but the best way to improve the condition for everybody is to do far less wealth redistribution and provide far more incentives for everybody, rich and poor alike, to contribute to the pool.
     
    • Thank You! Thank You! x 1
  5. rightwinger
    Online

    rightwinger Paid Messageboard Poster Gold Supporting Member Supporting Member

    Joined:
    Aug 4, 2009
    Messages:
    120,518
    Thanks Received:
    19,878
    Trophy Points:
    2,190
    Location:
    NJ & MD
    Ratings:
    +45,527
    Wealth Distribution

    Clearly we are more concerned about the possible increase in the .2% of wealth controlled by 40% of the population than daring to touch the 34.3% controlled by 1% of the population
     
  6. theDoctorisIn
    Offline

    theDoctorisIn Senior Mod Staff Member Senior USMB Moderator

    Joined:
    Aug 12, 2009
    Messages:
    30,045
    Thanks Received:
    5,803
    Trophy Points:
    1,140
    Location:
    East, but still West
    Ratings:
    +11,991
    No one is seriously proposing an "entire system" of wealth distribution.
     
  7. PatekPhilippe
    Offline

    PatekPhilippe Senior Member

    Joined:
    Jul 30, 2009
    Messages:
    8,171
    Thanks Received:
    1,200
    Trophy Points:
    48
    Location:
    Sasebo Japan
    Ratings:
    +1,200
    Nothing is stopping you from getting a piece of the "5% of the population's" breaks....other than you limiting yourself or just plain being lazy. That's what America's all about....or have you forgotten?
     
  8. theDoctorisIn
    Offline

    theDoctorisIn Senior Mod Staff Member Senior USMB Moderator

    Joined:
    Aug 12, 2009
    Messages:
    30,045
    Thanks Received:
    5,803
    Trophy Points:
    1,140
    Location:
    East, but still West
    Ratings:
    +11,991
    So, you must be a billionaire then, right?
     
  9. PatekPhilippe
    Offline

    PatekPhilippe Senior Member

    Joined:
    Jul 30, 2009
    Messages:
    8,171
    Thanks Received:
    1,200
    Trophy Points:
    48
    Location:
    Sasebo Japan
    Ratings:
    +1,200
    No...far from it...but I have taken advantage of every opportunity given to me and I enjoy quite a comfortable living in a recession proof career. You make your own bed and right now I sleep on a 2 foot thick Stearns & Foster.
     
    • Thank You! Thank You! x 1
    Last edited: Mar 7, 2010
  10. theDoctorisIn
    Offline

    theDoctorisIn Senior Mod Staff Member Senior USMB Moderator

    Joined:
    Aug 12, 2009
    Messages:
    30,045
    Thanks Received:
    5,803
    Trophy Points:
    1,140
    Location:
    East, but still West
    Ratings:
    +11,991
    I as well enjoy a comfortable living in a recession proof career. But I don't believe that I should be paying less of a percentage of my income than someone making half as much as me.
     

Share This Page

Search tags for this page

ideaology of wealth distrubtion is a flawed concept