Brad Wardell's views about technology, politics, religion, world affairs, and all sorts of politically incorrect topics.

There is an excellent book called Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money--That the Poor and Middle Class Do Not!

I highly recommend it to people.  In many discussions on-line, it becomes really apparent that most people don't really understand money. They know what it does but they have no idea how it works, where it comes from, and how to make more of it.

Conceptually, it's straight forward: If I have $1 and my goal is to have more than $1 then I need to invest it in things that will generate a greater than 1.0 rate of return. 

Most people make money by converting time into money -- they trade their labor for money.  It is what they do with that money that determines how wealthy they are going to be.

If the average human being takes $1 and makes $1 back that means there are lots of people who take $1 and will turn it into $.50 just as there are people who can take that $1 and turn it into $2.

People who advocate higher taxes on "the rich" usually don't have much of an understanding of money.  The government, at its best, will take $1 and consume it with it being transferred somewhere else.  So it gets $1 in and $1 out.

That means if it is taking capital from people who take $1 and can turn it into $2 they are, in effect, decreasing the overall wealth of society.  Society never realizes this is happening because they don't know what they're missing. 

Of course, prior to the rise of republican government and private property rights in the 18th century, the wealth of world societies grew extremely slowly because tyrannical governments (kings, queens, emperors, whatever) ultimately controlled all the capital they could get their hands on. 

Soviet Russia was the best modern example where the state had, by definition, all the capital thus its society was effectively in suspended animation while the west profited by having those who could take $1 and turn it into $2 have as much freedom as possible.

Online, you regularly see people argue that the government can take $1 from "the rich" and give it to the "needy" but that should only be done as a last resort and only short term since, by definition, the chronically poor are people who will take $1 and turn it into less than $1. They are, literally, consumers.  Over the past few decades, we have increasingly become a society of consumers as most people know. But we have all still managed to benefit because thanks to technology and economic freedom, there are people who take $1 and turn it into $1000 out there.

Nothing threatens the progress our society makes, however, than when people stop realizing how all this progress occurs. It's not government that does that but free men and women. Citizens.

Governments must tax its citizens to provide basic services, security, and law enforcement. When the government moves beyond this, we all ultimately suffer because every dollar taken from citizens is a dollar that is no longer available to be invested in one form or other. 

That is why, as a society overall, we are better off with the smallest government we can absolutely tolerate.


Comments (Page 3)
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on Dec 29, 2008

Do the poor live in caves? If not, then they seem to benefit when society as a whole becomes wealthier

If you have a society of 1 poor person and 10 average income people, and then society's wealth doubles, with the average income people all becoming rich, and the poor person having their income unchanged, other than the relatively insignificant positive impact on the poor person of there being a chance the rich might choose to give them money (via chairty), assuming that such charitable givings weren't included in the original 'wealth' measures. This would also be offset (either wholly or partially) by the negative impact of inequality (for example relative income inequality has a negative impact on happiness), which incidently would also have a harmful impact on those now rich people. Living in caves also has nothing whatsoever to do with this. I'd rather have $1 than have my neighbour have $2 and me have $0. Meanwhile society if looking to maximise the overall 'benefit' of people may well prefer a poor person to have $1 than a rich person to have $2 for the reasons I already explained.

So if the poor person isn't benefitting significantly when the rich person gets wealthier and the poor person's wealth doesn't change, that then means that for that poor person to benefit from society becoming wealthier more than if society was made a bit poorer as a result of redistribution (taking from the rich to give to that poor person), you'd need the negative impact of the redistribution to outweigh the money from the redistribution to that poor person, which is a highly unlikely result (and would likely occur with very high tax rates where you can end up with the situation of an increase in taxes causing a decrease in revenue).

So, the poor can benefit when society becomes richer, but not as much as if society is made a bit poorer and they receive some of that money (i.e. taking $1.5 from the rich to give $1 to the poor), hence if starting from a position of such a redistribution then adopting a non-redistributive wealth increasing policy would not benefit the poor. Similarly if starting from a position of non-redistribution and adopting a redistributive policy you can benefit the poor. The value of $1 to each person can then be used to weight the wealth for society to determine which result it feels produces the greatest benefit, which will typically lead to some distribution in a democracy

 

most people don't recognize the unintended consequences of taxation

True, but many people also don't recognise some of the reasons for taxation that produces unintended consequences either

on Dec 29, 2008

If you have a society of 1 poor person and 10 average income people, and then society's wealth doubles, with the average income people all becoming rich, and the poor person having their income unchanged, other than the relatively insignificant positive impact on the poor person of there being a chance the rich might choose to give them money (via chairty), assuming that such charitable givings weren't included in the original 'wealth' measures.

And you are living in a society where the poor still live in caves and thus haven't profitted from the voerall increase of wealth?

I'm not sure I understand your point here.

 

on Dec 29, 2008

Consumers indeed, and you seem to have much disdain (or even contempt) for them.  Yet if they didn't exist, you wouldn't have a business, Brad

There is no possible reality in which consumers don't exist. They are not a group, they are an aspect. Everyone is a consumer.

 

on Dec 29, 2008

Leauki
If you have a society of 1 poor person and 10 average income people, and then society's wealth doubles, with the average income people all becoming rich, and the poor person having their income unchanged, other than the relatively insignificant positive impact on the poor person of there being a chance the rich might choose to give them money (via chairty), assuming that such charitable givings weren't included in the original 'wealth' measures.


And you are living in a society where the poor still live in caves and thus haven't profitted from the voerall increase of wealth?

I'm not sure I understand your point here.

 

He seems to be making a lot of "ifs". Many of which are impossible ifs.

on Dec 29, 2008

but since tehre is a fairly static amount of "wealth" in the world,

No there is not.  That is apparent by the new industries that have sprung up just in the last few years.  Wealth is indeed created, not limited.  The only limit is your imagination.

on Dec 29, 2008

And you are living in a society where the poor still live in caves and thus haven't profitted from the voerall increase of wealth?

I'm not sure I understand your point here.

I'm not sure I understand your point! I've never argued that a growth in wealth will see the poor getting 0% of the wealth, with the rich getting all of it (examples I've used which feature this have been to demonstrate another point, and hence have been simplified to more clearly illustrate this), in fact the reverse, and so see the cave point as irrelevant to what I was arguing, as I mentioned above. If you still think it's relevant wrt what I'm arguing, perhaps you would care to explain how it negates (partially or wholly) my point?

He seems to be making a lot of "ifs". Many of which are impossible ifs

For good reason - if people struggle understanding a simple concept/relationship when all other things are stripped out so as to allow the one specific thing to be focused on, how will it make it any easier to include every conceivable scenario that might affect that? To put it another way, if A = B, then A+X+Y+Z = B+X+Y+Z. Simply saying A=B might be making an 'impossible if' that X+Y+Z = 0, but it also makes it much simpler to examine.

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