Tuesday, September 29, 2015

Don Boudreaux illustrates how wrong a Professor of Philosophy can be on Economics

The moral of Don's comment, below, illustrates that people with advanced degrees and high academic status can miss the point just as effectively as someone who never went to college.  I conjecture that the difference between the two is that the latter may be more likely to appreciate that he may be wrong than the former.

 Princeton University Press generously sent to me a copy of Princeton University philosopher Harry Frankfurt’s hot-off-the-press book, On Inequality.  This book is very short and so, although I’m an exceptionally slow reader, I’ve already read about half of it.

Depending upon my time and inclination, I might or might not in the near future blog more on this book.  But I here wish to quote a passage in it that occurs very early on (on page 4):

"In extracting from the economic wealth of the nation much more than they require in order to live well, those who are excessively affluent are guilty of a kind of economic gluttony."

While I agree with what I (so far) detect to be a principal theme of Frankfurt’s book – namely, that income inequality itself is morally unobjectionable – this quoted statement conveys in about as short a compass as I’ve ever encountered the deep misunderstanding of the economy that is shared by far too many people.  What follows is only a partial review of the errors that infect the above quotation:

(1) Wealth in a market economy is not ‘extracted.’  Instead, wealth is created and produced.

(2) Therefore, there is no “economic wealth of the nation” that exists independently of the efforts of entrepreneurs, innovators, and producers to create such wealth.  Such wealth, once created, can be stolen from its creators and producers.  But it is a fundamental conceptual error to suppose that there is some national wealth that exists in natura, independently of human innovative and productive efforts.

(3)  The nation in such a discussion is of no relevance.  Even if (contrary to fact) wealth is created by nature and is simply ‘extracted’ from the earth by humans, why focus on the nation rather than on the globe?  Surely nature cares not a whit for the arbitrary political boundaries that her human spawn draw (and alter over time).  Surely nature regards an epsilon increase or decrease in the well-being of an individual who resides in nation X with no more or less interest than she regards an epsilon increase or decrease in the well-being of an individual who resides in nation Y or in nation Z.

(4) There is no objective meaning to the phrase “require in order to live well.”  “Require” could – indeed, strictly does – mean only “enough to subsist.”  As such, therefore, no one requires aspirin.  No one requires hard (as opposed to thatched) roofs.  No one requires more than one change of clothing.  No one requires literacy, or numeracy beyond a grasp of basic arithmetic.  No one requires running water or flush toilets or telephony or access to electrical power or artificial lighting or inexpensive birth-control methods or that the “digital divide” be bridged.  (Indeed, the vast majority of human beings throughout history have never experienced such luxuries.)

(5) So to accuse someone of being “excessively affluent” inevitably is to make what amounts only to a value judgment rather than to refer to some colorably objective criterion.

(6) The “economic gluttony” ending of the above quotation reveals that its author has, if not strictly a fixed-in-size-pie view of wealth, a view in which wealth is seen to be largely independent of human creativity, effort, risk-taking, gumption, and choice.  Someone who becomes very rich is, in this view, someone who gluttonously grabbed more from the common store than is his or her due.

In short, the conception of human prosperity conveyed by the above-quoted statement is horribly, totally, and calamitously mistaken.  Yet it is a conception held by, I’m sure, at least 80 percent of the world’s population.  Sad.  And scary

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