Moose antlers, taxes and the second iphone

February 28th, 2017
by Chris

There’s an interview with Robert Frank on the “Evonomics” site which I thoroughly recommend. Actually, both the interview and the site generally, as it tends to publish articles very critical of neoliberal economics, and regular readers will be well aware of my attitude to that!

I want firstly to highlight a couple of results from research which he mentions. First is the finding that studying economics makes people more selfish and less communitarian, based on experiments using the prisoner’s dilemma. If you couple that with the critique of short-term thinking arising from the sole preoccupation being stock value (“maximisation of shareholder value” being the one and only objective in neoliberal economics), you can see that training people in neoliberal economics and then packing management with these MBAs is going to produce a system in which short term gain is everything and there is very little, if any, consideration of “the general good”.

The article then successfully critiques competitive behaviour, and it is easy to draw a parallel between the over-sized antlers of the moose and the $2,000 suit at interview, the $72,000 wedding and the over-specified Lexus. All of those are seriously wasteful compared with something which would be entirely adequate, and all of them involve a kind of “arms race” in which just the knowledge that other people are doing something leads to very many people feeling compelled to do the same.

I don’t myself react that way, and I don’t think anyone who studies the synoptic gospels and seeks to follow (albeit imperfectly) Jesus’ commands should react that way either. If I’m buying something, I want to buy something which is adequate for the task I intend. Anything beyond that, and I am thinking “I should be content with enough; any surplus should go to helping those less fortunate than me”. I also consider that Genesis gives us a clear direction to be good stewards of creation, and therefore anything which uses up natural resources to no good purpose (such as the wedding or, probably, the car) is failing in that stewardship. Again, when  interviewing (and I do some of that from time to time) I actually tend to downgrade anyone who is too well turned out (the $2000 dollar suit) because that tells me they’re likely to be wasteful, uncharitable and more concerned with appearance than actuality.

The trouble is, the thread running most of the way through the article is that perceptions matter, and we are educating and employing people to attitudes which are contrary to the spirit of aiding the least among us, the “preferential option for the poor”. I used to think that at least some of this communitarian spirit had worked its way into the general consciousness of my increasingly non-Christian country, but since 1980 that seems to me to have changed, and I see little chance that the dreams of some of my evangelical friends, that there will be a wholesale revival and people will flock in droves to following the social gospel will come about (following the Great Commission). Actually, it seems to me that we have an uphill task persuading a lot of self-identifying Christians that they should reasonably devote, if not all then, say, half of their effort and money to the poor (following the tax collector rather than the rich young man there, which I could argue demands a marginal tax rate of at least 50% for the wealthy!). Can we do any more than the two counter- normative attitudes I mentioned in the last paragraph, aside the Great Commission? Well, we can point out that in the Prisoner’s Dilemma, the less selfish path produces the greatest good for all, and to stacks of research indicating that a strong communitarian sense benefits everyone in society.

The second piece of research is that from playing monopoly, and from observing the habits of drivers. It seems that being rich makes you, basically, more of an a*hole. OK, there are some extremely rich examples of massive philanthropy, notably the Gates family and Warren Buffett, but the vast amount of money they are giving away leaves them still among the top 0.1% (let alone 1%) of humanity, and this does not seem to be universal among billionaires by any manner of means. They are exceptional.

That also argues that, if we want to have a society with less a*holes, we should try hard to reduce the income and capital gap between the very rich and the rest of us. We might also note research that shows a direct correlation between health (of all, not just the poor) and equality of income in societies, and another Evonomics article indicating that large wealth gaps tend towards societal collapse. If we’re going to do this as a society, we either need a culture in which vast incomes are seen as shameful (which, again, I would argue flows from consideration of the tax collector and rich young man stories) or we need to tax the rich more heavily.

The article, in fact, suggests just that – but it suggests it as a graduated tax on consumption, rather than on income. I don’t think that would work. Firstly, part of the problem with inequality is “decreasing marginal propensity to spend”; the poor are going to spend pretty much everything they receive immediately, the rich can do without the fourth ice cream, and sometimes do. Even more so they can do without the second iphone… Inequality slows down the circulation of money, and that circulation is what powers the economy. Secondly, as another Evonomics article points out, saving doesn’t fuel investment (or at least it doesn’t do that well).

The fact is, if you put £10 in the pocket of a poor person, it will be in the pocket of a rich person again within 24 hours (because he will spend it); if you put £10 in the pocket of a rich person, it will probably just sit there, maybe finding its way into a bank sometime next week. The first yields you an improved economy, the second actually slows down the economy.

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