Tax the Rich?

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Ludwig von Mises thought that civilization would founder and fail unless intellectuals understood correct economic policies and educated the masses to them. That is because civilization depends on the social cooperation and coordination brought about by free markets, non-inflationary money and property rights. Von Mises was correct. Unfortunately, today’s intellectuals by and large are either coopted by the nomenklatura or are themselves nomenklatura. It is in the interest of abundant numbers of economists to transmit fallacious economic ideas. Consequently, civilization is faltering along with a sound economy. The sad fact is that one can find comment after comment arguing that capitalism is a failure and that taxing the wealth of the rich is a solution and the road to a sound economy.

An example is the popularity and affection heaped upon an economics book written by French economist Thomas Piketty. Since he supposedly has found a deadly flaw in capitalism and purports to have a remedy (global wealth taxes), he has been embraced by liberals, progressives, and socialists, or by all those who never understood economics in the first place. For an Austrian approach to Piketty’s concern over wealth distribution, see here. The author of this article finds evidence to support the view enunciated by von Mises and Rothbard that inflation causes the distribution of wealth to become top-heavy. For further argument and evidence of this factor, see here. For a more sensible approach to wealth than the economics of Piketty, see here.

It will help in understanding Piketty’s elevated concern with income distribution and his tax proposals to know that he supported the socialist candidate in 2007 and reportedly “has close connections with the French Socialist Party.”

Economic policy-making by the state is an horrendous disaster area, from A to Z. The state readies and drops bombs continuously, blasting one segment of the economy after another. To focus on income distribution as yet more grist for the politician’s mill is pure insanity. Income distribution is the outcome of factors too numerous to mention, much less control, success and failure at creating wealth being one of them. There is absolutely no reason to believe that the state can improve upon free market outcomes, and the latter include voluntary wealth transfers and charitable contributions. There is every reason to believe that the state’s interference will distort incentives perversely, as it has already in many of the state’s attempts to end poverty.

The people who will indulge in the insanity of attempting to control the distribution of wealth are of two main kinds. There are first the ignorant. They are those who do not understand the negative consequences of widespread state interference in this or any other economic matter. The second are those who stand to gain by such interference because it suits their fancy, their ideology, their religion, their quest for power, their influence, their popularity, their wealth or their chances of reelection. They include politicians. They include those in the nomenklatura who benefit by being the architects, purveyors, advisors, researchers, reporters, economists and administrators of such measures.

Anyone who pretends that he knows how to restructure the wealth of a set of people so as to cause a better situation than letting nature take its course should think about how well they could do this among their own siblings or among all the children and elderly that are related by blood and marriage in their family. The wealth disparities and differences in situations among this rather small group will be much larger than one might suppose. One should be humbled by the difficulty of acting as one who had the power to redistribute wealth among the people in this group with the supposed aim of either increasing happiness or stimulating economic growth.

1:38 pm on April 25, 2014