The Political Purpose of Debasing Profits

I think the job of an economist, before determining his political affiliation, is to first make sure he can rationalize all political affiliations.  Otherwise, he doesn't understand people, or society.  It is important that he does understand society, to the extent that anyone can.  Here are some of my forays into this worthy exercise.

Why do liberals / progressives consistently demonize rich people and the earning of extraordinary profits, even if the income of most people is rising?


   In economic issues, the central component of the progressive platform is force.  Force employers to pay people a certain wage or don't hire them at all.  Force investment firms into mortgage-backed securities and taxpayers to subsidize the homes of others.  Force other taxpayers to pay for the education of my students.  Force you to pay for the health care of other people.
   However, at the same time people support large government plans to redistribute wealth, they dislike the notion of forcing people to do things.  It makes us seem dictatorial.  Consequently, they must be convinced that the people they are forcing are immoral, and that is why the very richest of people will usually be seen as corrupt to the progressive party members.

   Or, does causation run the other way, and force is the natural consequence of believing the richest among us are corrupt?  And let's not deny the possibility that the richest Americans may actually be corrupt (though if they are, does more government solve it, or less?).

Libertarian Paternalism

     This is my theory about Libertarian Paternalism.  There are people who will insist on "nudging" others, for a variety of reasons, some of them well-intentioned. If you don't give them something to nudge (if you don't let them set the status quo for retirement account savings rates, or influence whether fruits come first or last in a school cafeteria) they will eventually begin to shove, and they will justify their shoving as an attempt to prevent society from you.
     You will have become "the man" who oppresses society.  Let them nudge just enough to occupy themselves, and keep them out of the bigger decisions.  Because if they ever get the power to shove, everyone and everything will seem to need shoving.

Nothing New Under The Sun: Daoism and the Law of Unintended Consequences

Economists love the Law of Unintended Consequences, illustrating how ambitious politicians can often make her constituents worse off in her appeal to enhance their lives.  In my textbook, I use the example of air pollution in Mexico City, where a law requiring each car to remain idle one day each week resulted in more older cars being driven, which resulted in worse air pollution.


I had only encountered this law in economics, yet I recently discovered there is nothing new under the sun that economists can offer.  Between the 6th and 4th centuries B.C., Chinese philosophy of governance consisted largely of two camps: Confucianism and Daoism.  We have all heard of Confucius, but Daoism?  


Basically, Daoism asserts that our understanding of the world is limited, that everything that happens, happens for a reason, and when we attempt to employ our limited knowledge to control the world we often destroy institutions and activities that serve a valid purpose, and in the process, become ineffective leaders.  That is, in essence, the Law of Unintended Consequences.


Source:
Dr. Kenneth J. Hammond
From Yao to Mao: 5000 Years of Chinese History
Lecture 5: Confucianism and Daoism
The Teaching Company

Dictatorship of the Proletariat

Until recently I thought that the wealthier classes would favor dictatorship and the poor and lower-middle class would favor democracy, but I am considering abandoning that position. This is the new position I am considering.


A ruler with the ability to dispense large sums of money, but can only do so with the consent of the voters, may be more sensitive to the desires of the campaign contributors (most of whom are relatively wealthy) than the lower income citizens. The democratic ruler is thus tethered to the wealthy, whereas in a dictatorship, the wealthy are tethered to the ruler, allowing the dictatorship to respond to those who cannot fund campaigns—something he could not before do.  This is why the poor often desire autocrats, while the wealthier classes espouse the benefits of democracy.


From where did this new position arise? Various instances. In 23 B.C., during severe food shortages Roman citizens pleaded with Augustus to "seize absolute power openly and unambiguously."


"The panic-stricken and angry mob did not trust old-style republican politicians to govern effectively and called for Augustus to be appointed dictator. It besieged the Senate House and threatened to burn it down with the senators inside if they did not vote for the appointment."
—Everitt, Anthony.  Augustus: The Life of Rome's First Emperor.  Chapter 15.  Page 194 of paperback.  2007.  Random House.


After the Russian Tsar abdicated in 1917, Russia began installing a modern democracy, mimicking both American and British democratic systems.  Eventually, though, the large class of peasants changed their politics and helped install a man named Vladimir Lenin, who was openly calling for a Dictatorship of the Proletariat.


Moreover, throughout most of Russian history from Peter the Great to the last Tsar, the Russian peasant loved their Tsar, though they hated the nobles to whose land they were tied.  They might rather have a monarchy than a democracy controlled by the nobility.


Americans who espouse giving greater consideration to the working class and poor tend to favor government coercion over voluntary consent.  I'm thinking here of minimum wage and union supporters, and the very poor on welfare and food stamps.


I'm sure there are some examples to the contrary I have not found.  It is just an idea, one that five years ago I would have considered absurd—I no longer do.