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Guest Post: On The Economic Calculation Of "Fair Share"

Tyler Durden's picture


Via Dusan Petrovski of the Ludwig von Mises Institute of Canada,

When one speaks of a concept it is important that it is properly qualified so as to be correctly understood. Failure to accomplish that makes impossible for either the problem to be identified or a desired solution to be found. Perhaps this is why politicians have a tendency to speak of ill-defined and oft muddled concepts, like “social justice,” “a living wage” or “fair share.” These concepts are impossible to define in a way consistent with how they are represented, since their proponents represent them as definite, rather than abstract matters. In our time the demand for “the rich” to pay their “fair share” through higher taxes has become a standard war cry broadcast from every public and crony source of media. Yet, there is no objective means of defining either what constitutes “the rich” or “fair share.” Politicians and demagogues alike may debate these issues for as long or as short as they may desire, but whatever level they agree on is sure to be arbitrary, save for the only objective conclusion that such concepts are impossible to quantify.

Given a communistic ownership of schools, roads, streets, parks, healthcare institutions, libraries, schools and universities, how is one to be able to calculate each person’s use - “fair share” - of each? What share of a road belongs to a particular taxpayer? What usage is “fair share”? How many books in any given library belong to a specific person and which specific books? Who owns the walls and who owns the library’s carpets? Does the person paying more in taxes own more of the roads, libraries or schools than the person who pays less? What of the person who pays no tax at all? What of the person who desires to use his claim on a gymnasium, and of nothing else? Does the state university graduate owe a particular service to the taxpayer that subsidized or paid for the operation of the university? A typical example of who “fair share” proponents see the world is given to us by US Sen. Elizabeth Warren:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for.

As communistic concepts go, the idea of the “fair share” is simply a reiteration of the “from each according to his abilities, to each according to his needs” idea. The first question that poses itself is who is “the rest of us,” and how much did each of “the rest of us” contribute to the end of providing the goods and services Warren talks about? Furthermore, how are we to know that “the rest of us” get a market return on their investment in the public roads, schools, police and firefighting forces? In presenting the issue like that, we discover that we are unable to perform the critical task of economic calculation.

We will not even try to right everything that is wrong with Mrs. Warren’s statement and reasoning, just some of it. (Here we will ignore that fact that the majority of taxes in the US and Canada are paid by a very small percentage of the population.) According to Warren’s logic, a shovel making entrepreneur who never attended a university, and built up his business through his own work, acumen and sacrifice, saving and wise investment, still reaps the benefits of the university he never attended, by virtue of the fact that someone who did can now be employed by the shovel maker as an accountant. While true that the shovel maker reaps the benefits of the accountant’s services, if he is hiring the accountant, it must follow that the entrepreneur is paying for those services. Once the shovel maker puts the university graduate under his employ, the first pays the second for the services he performs for him.

Despite their outward dissimilarity in how they accumulated their abilities, the university graduate is no different from the shovel maker who learned his trade outside the educational system. The university graduate went to school for four years and accumulated knowledge. The shovel maker paid for his training either through the process of apprenticeship or through trial and error, or perhaps even attended a shovel making school. Either way, the shovel maker gave up some of his own savings or earnings in order to find more efficient ways of producing a more marketable product.

If the graduate was paid to be educated by virtue of taxpayer subsidies, and then paid to dispense his knowledge, he is investing nothing and gaining everything. Who owes what to whom here? Is the shovel maker—a taxpayer—part of “the rest of us” or is it the tax consuming university graduate? If the goods and services listed by Warren are paid for by taxes, then contributing to the tax revenues of a jurisdiction makes one a member of “the rest of us”—the body of people that paid for the goods and services in question. Yet, still we cannot calculate to what extent the shovel maker’s taxes paid for the accountant’s education, and what portion of the shovel maker’s taxes contributed to road construction.

What is the “fair share” that the university graduate owes to the shovel maker? Here we need to extend the scope, and ask “What is the ‘fair share’ that the shovel maker owes to the baker for the construction of the roads?”; “Why not have shovel maker pay the baker for the use of the road?”; “What is the ‘fair share’ that an obese alcoholic owes to a health-nut?” and so on. While it is possible to calculate the university graduate’s marginal value product in his function as an accountant employed by the shovel maker, it is not possible to calculate how much this shovel maker contributed to the training and education of this particular university graduate. The same principle can be applied to roads, libraries, police and fire departments and any other “public” good or service. It follows that the “fair share” doctrine is an indefinable political tool intended to be used as needed, when needed, by office seekers. It is not a policy to be sought in order to bring equality under the law or economic prosperity, as it is a concept that runs against the principle of private property.


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Sun, 01/06/2013 - 22:22 | 3128469 nmewn
nmewn's picture

I am not my brothers keeper, I am his executioner...otherwise known as Stalin.

Tue, 01/08/2013 - 02:40 | 3131473 philipat
philipat's picture

I made a comment which has simply disappeared from this thread. It did not involve any profanity. It has also disappeared from my posting history. Can anyone help explain? Does ZH delete comments for whatever reason(s)?

Just to repeat the comment, it was:

"I didn't think that Private Property was relevant in the modern Marxist State" (+10 at last count)

Sun, 01/06/2013 - 22:23 | 3128472 buzzsaw99
buzzsaw99's picture

I'm waiting for the shovel maker IPO so I can invest and he can cash out billions because he is just that much damn smarter than me. [/sarc.]

Sun, 01/06/2013 - 22:25 | 3128480 surf0766
surf0766's picture

Just wait until they start the 'we need a 10% wealth tax' talk.


It should start in the next few weeks.. as a way to reduce the debt.

Sun, 01/06/2013 - 22:30 | 3128500 buzzsaw99
buzzsaw99's picture

if they did that the stock market would crash and the bernank would have to buy a bunch more bonds. just hang the fuckers.

Sun, 01/06/2013 - 22:38 | 3128522 otto skorzeny
otto skorzeny's picture

right about the time Dianne Jewstein grabs everybody's guns.

Sun, 01/06/2013 - 22:54 | 3128560 flacon
flacon's picture

What Really Happened At Sandy Hook?

Sun, 01/06/2013 - 22:40 | 3128526 Salon
Salon's picture

Wealth taxes wouldnt be necessary if we had allowed the banking system to implode.

Depressions and revolutions are the best reset button. Even if a wealth tax were passed the super rich 0.01 percent have so many shell companies and nominee corporations amid layer after layer of offshore trusts that there would be no way to tax it.

Sun, 01/06/2013 - 23:18 | 3128608 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Capitalism will purify the excesses. We have crony capitalism which is nothing more than the good ole boy society robbing everyone else.

Mon, 01/07/2013 - 09:52 | 3129188 Seer
Seer's picture

"Capitalism will purify the excesses."

And when is this to occur?

Further, what is "excess," and who is going to to purify it?

Really, statements such as this border on fantasy, as though "Capitalism" is some caped-crusader that's lurking in the wings.

The ABUSES that exist are the result of POWER.  POWER doesn't cede itself without a fight.  The "good ole boys" command the military.

Mon, 01/07/2013 - 10:50 | 3129323 Opinionated Ass
Opinionated Ass's picture

Capitalism is an economic system respecting private property rights.

Capitalism depends on law being applied by a third party contractually chosen by participants in advance of conflict, eg. for-profit arbitration courts. Currently, for example, if a government tax collector steals your property, a government court will decide whether or not he acted legally. This is not capitalism.

We indeed do not have capitalism anywhere on earth now and it would be awesome and sure, "purifying", if it were to show up somehow. If you want to imagine a "Captain Capitalism" as a glorious caped crusader that's fine with me. Every step we take to educate others about true capitalism is a step closer to bringing him swooping over the land and maximizing freedom and prosperity.

Is power needed? Sure. Have you heard that the pen is mightier than the sword?

Sun, 01/06/2013 - 22:37 | 3128520 otto skorzeny
otto skorzeny's picture

that guy that the FD and PD watched die in that retention pond in Champaign IL the other day must not have paid his fair share to the collective. maybe that's why the cops threatened to arrest any citizen that offered to help the guy out.

Mon, 01/07/2013 - 00:31 | 3128729 ebworthen
ebworthen's picture

Over ten minutes to even get a rope to him.

Overtrained like SWAT teams; who will spend 20 minutes "cordoning off" a shooting scene which means everyone will be shot and dead before they even think about preventing anything.


Oh, I feel so safe with my overtrained heavily lawyered up liability limited "peace officers" and "first responders" protecting me.

Fucking worse than the Middle Ages in this fucked up Kleptoligarchial shit-storm.

Mon, 01/07/2013 - 01:19 | 3128803 Kimo
Kimo's picture

The result they hope for?  Everyone is dead.  No workmans comp issues, unless some turd trips over the front steps.

Mon, 01/07/2013 - 05:04 | 3128952 Acet
Acet's picture

Reminds of a story I heard the other day when I was selling my car and was chatting to a potential client on the phone. He was telling me how a neighbour who "has two Ashton Martins" and a very big house had a police car parked outside his house for 2 weeks with two officers in it because he had received a phone call demanding that he paid money or otherwise be kidnapped.

I just kept thinking: would they ever park a car with 2 police officers for two weeks outside the house of a poor single mother whose ex-boyfriend had threatened to kill her?

(This being the UK, the answer is "No!").

I bet the guy that drowned wasn't one of the elite ... had somebody shouted "He's the son of the Mayor/Reporter/Local-Industrialist" he would've been saved promptly.

Same thing for the Justice System: your local Public Prossecution Office will only ever take to Court those people who have no connnections and that can't afford high-priced lawyers.

Mon, 01/07/2013 - 07:07 | 3129019 Ghordius
Ghordius's picture

+1 acet, I agree. to bring the dying discussion back to the "Fair Share" issue - and of course taxes

I had a look at the United Kingdom's Independence Party's website and found something interesting 

"UKIP believes in merging income tax and national insurance into a flat rate income tax to greatly simplify our tax code, which currently stands at over 11,000 pages.

At the last election we opted to merge 20% basic income tax with 11% national insurance to create a 31% flat tax on all earned incomes over £11,500.  As a tax cut for all, with a higher threshold, it would also take the poorest paid out of income tax altogether. 

It would also mean abolishing the existing 40% and 50% income tax brackets, the latter actually costing the economy rather than taking in revenue. 

For employers, UKIP aims to abolish employers’ national insurance across a parliament to end the tax on jobs.  This will undoubtedly boost employment and simplify the process of employing people"

Now this is refreshing - as you know I'm usually lambasting Nigel Farage for the City of London bankster lobbyist that he is (and an official Fellow of that old corporation, of course)

but now I wonder: UKIP is in favour of A) a 31% flat tax rate AND they have made noises for B) an international harmonization of taxes around the level of 31% to 33% for all income (sorry, I'm missing a link for this)

Question: from the point of view of our US Libertarians posting here on ZH, can UKIP still to be counted as libertarian? the B) proposal is usually seen as a "globalist" scam - even Tyler makes some noises against it and some further evil lurking behind it

btw, personally I support flat tax rates and simplifications of the tax code (embellishments are usually scams). note the shift from "labour income" to just "total income"

Mon, 01/07/2013 - 11:03 | 3129365 Opinionated Ass
Opinionated Ass's picture

Tax is legalized theft. I support private property rights. Period.

Mon, 01/07/2013 - 13:31 | 3129853 Ghordius
Ghordius's picture

Opinionated Ass, here in the Old World we don't see private property rights in conflict with taxes. but I do see that where you come from this view has changed. have fun with it, then, and all the best ;-)

Mon, 01/07/2013 - 12:47 | 3129726 Colonial Intent
Colonial Intent's picture

Some in the uk dont give two hoots for his economic policy, they are far more angry that UKIP and the BNP collude when choosing politicians in elections.


BNP do not put up candidates against UKIP and vice versa.

All smells a bit fishy.

Mon, 01/07/2013 - 13:34 | 3129865 Ghordius
Ghordius's picture

they are two small parties on the right in a first-around-the-post electoral system - you can't really blame them, it's either this or no chances of seats

look how many non-Democrats and non-Republicans get seats in the US and compare

Mon, 01/07/2013 - 13:32 | 3129857 Panafrican Funk...
Panafrican Funktron Robot's picture

It's still a tax on income, which is ass backwards and fuck-withable ("total income" can still have a shitload of carve-outs/loopholes).  Taxing sales only is the way to get to the proper end result.  I know there is a lot of crying about sales taxes being effectively regressive, but that's fairly easy to manage through existing transfer payments and other goodies already doled out.  

Sun, 01/06/2013 - 22:40 | 3128525 ramacers
ramacers's picture

hone the blade for the smug, elitist, theivin' political master classers.

Sun, 01/06/2013 - 22:48 | 3128547 Joebloinvestor
Joebloinvestor's picture

Life isn't fair.

I learned that along time ago and nobody is gonna change it.

Politicians make a bunch of noise about it, but I always see these guys better off then me so fuck um.


Why do people think it takes a person of higher "stature" to decide what's "fair"?

Sun, 01/06/2013 - 23:02 | 3128569 flacon
flacon's picture

Why do people think it takes a person of higher "stature" to decide what's "fair"?


Because people are so damned lazy, jealous, envious, contentious, but puny cowards so they need a god-man to commit their sins for them, so they form "GOVERNments" to steal on their behalf. 


I'm becoming more convinced that Doug Casey is right, An-Archy is the wave of the future survivors. I mean how stupid does one have to be to admit that they are incapable of GOVERNing their own life - and to give up PERSONAL SOVEREIGNTY to another who has a fancy title and a claim to GOVERN you. 


Mon, 01/07/2013 - 15:14 | 3130250 FrankDrakman
FrankDrakman's picture

My friend, you are aware that just over 100 years ago, most Americans lived on farms, and were barely capable of reading and writing? Outside of western Europe and North America, literacy was rare. In such circumstances, most people had little practical choice but to cede some portion of governance to people who were slightly more edumacated, as Homer might say.

In today's world of near universal literacy and near instant access to information, such a tradeoff may well appear irrational. But, in terms of human existence, the intratubes haven't even achieved blip status. And, as an old mentor once told me, it takes a long time to turn a big ship around.

Mon, 01/07/2013 - 02:53 | 3128882 FerretBrain
FerretBrain's picture

Thank you!  "Fair" is a 4-letter word.

Mon, 01/07/2013 - 10:03 | 3129203 Seer
Seer's picture

"Why do people think it takes a person of higher "stature" to decide what's "fair"?"

Because those of higher stature tend to have connection to/or ARE POWER.

"Politicians make a bunch of noise about it, but I always see these guys better off then me so fuck um."

I see that as a flawed trait.  If you're comparing yourself to others then you're likely trying to be MORE like them (which, you pretty much qualify by stating they are "better off" than you).

The bigger they are the harder they are going to fall.  The more disconnected from reality they are the more they are going to be smacked by it when it hits them.  People may believe that such people are doing well now, but, as we know, things change...

The meek shall inherit the earth.  If you want it (the earth) there's your tip...

Sun, 01/06/2013 - 22:59 | 3128571 conspicio
conspicio's picture

All this...and no mention of the Mount Laurel doctrine? Housing has been the bastion of "fairness doctrine" for decades. Even Congress called it the Fair Housing Act. Now, considering that, versus some hypothetical shovel-maker, we have real results, examples, and a basis for outcomes based on a desire for fairness. Ignoring that whole body of failure, let's go to union labor for their general definition in contractual talks:

"Fair Share: Under a union security clause of a union contract, the amount a nonunion member must contribute to a union to support collective bargaining activities. This arrangement is justified on the grounds that the union is obliged to represent all employees faithfully."

Unions, housing, and a thousand court cases of interpretive dance...errr, law, I mean...ripe for feeding pablum to the masses.


And of course, there is this...



Sun, 01/06/2013 - 23:04 | 3128578 Cabreado
Cabreado's picture

As we squirm,

I cry bullshit,

In a free society, "fair share" is a useless term.

Get with the program, cut down on your complicity... stop the enabling.

Wake up.
Stop being fodder for "of course we failed."

Mon, 01/07/2013 - 09:41 | 3129174 Seer
Seer's picture

Sadly, there's no "free society."  And, as long as there are centers of power there will be corruption that ensures that some are a little more fair than others...

But, yes, action is better than words.

Sun, 01/06/2013 - 23:14 | 3128595 cxl9
cxl9's picture

Obviously, "fair share" depends on which side of the check you sign.

Sun, 01/06/2013 - 23:14 | 3128596 alentia
alentia's picture

It is interesting how Warren change the effect vs the reason.


The reason a factory is opened because:


1. There are roads to transport goods

2. There are educated labor force

3. There are laws, police and fire department to protect the factory (property)


In the absense of the 3 above the factory would not be opened there, but somewhere else where 3 conditions as above are met.

If 3 above would not be there, current factory employees, would be otherwise unemployed collecting government (other peoples money) benefits to do nothing. The effect is at least tripple negative to country's budget: - corp taxes - personal taxes - welfare.

It is somewhat interesting how politicians can turn words around and masses would not even notice the gimmick used, but accept it as a true and reasonable statement.

Sun, 01/06/2013 - 23:24 | 3128622 otto skorzeny
otto skorzeny's picture

kind of like in "1984" when it switched Eurasia being our enemy to our former ally Eastasia becoming our enemy in the course of one speech

Sun, 01/06/2013 - 23:15 | 3128600 proLiberty
proLiberty's picture

It is not a far distance from "you didn't build that" to "you don't own that", to "you owe me that", to "be glad we let you keep what we did".


Mon, 01/07/2013 - 00:29 | 3128727 AU5K
AU5K's picture

All your base are belong to us.

Mon, 01/07/2013 - 01:20 | 3128804 ghengis86
ghengis86's picture

I think we're already there.

You didn't build that (business).
You don't own that (if you don't pay your taxes).
You owe me that job (or you'll pay for my welfare).
Be glad we let you keep what we did (because we could just raise taxes even more)

We're so fucked.

Sun, 01/06/2013 - 23:33 | 3128640 Never One Roach
Never One Roach's picture

Everythng is mine.


That sounds "fair" to me.

Sun, 01/06/2013 - 23:40 | 3128651 thatonekid13
thatonekid13's picture

The best refutation against the Warren quote is also the simplest yet most often overlooked. It is arises from the nature of public goods. Public goods are by definition non-excludable and non-rivalrous meaning that individuals cannot be prohibited from availing themselves of whatever the public good or service may be. For example, anyone can walk into the library or drive on the highways. Therefore, how can a feature common to everyone be a differentiating factor regarding someone's success and another's non-success? Public goods are non-incremental and irrelevant to the discussion. Why don't the sheeple grasp this basic logical point?

Mon, 01/07/2013 - 11:13 | 3129399 Opinionated Ass
Opinionated Ass's picture

The tooth fairy doesn't exist. Public goods don't exist. It is propaganda to make you agree to government theft of private property.


If I own a library, I can charge an entrance fee. If I own a highway, I can charge a toll. If I own a lighthouse, I can turn it off when my customers are not around.

Sun, 01/06/2013 - 23:54 | 3128675 LibertarianMenace
LibertarianMenace's picture

I'm sorry, but I couldn't force myself to read through all of Petrovski's apparently fine arguments. The fact that he(she?) had to make them at all in an attempt to counter the stupidity of someone like Warren, is pathetic. Unfortunately, she does represent what passes for convention. Stick a fork in us Jerry, we're done.

Mon, 01/07/2013 - 00:09 | 3128692 gould's fisker
gould's fisker's picture

Government's calculation of "fair share" is entirely scientific--it's based on an exacting calibration of how far the victim is willing to bend over.

Mon, 01/07/2013 - 00:20 | 3128697 ebworthen
ebworthen's picture

I'm all for keeping what you earn as long as you don't do it with the FED's help, or the Treasury's, or your Congress(whore)person, or a Judge, or a crooked cop or Justice Department, or subsuming bondholder's rights, or bailouts, or crony capitalism.

Until such time, the whole kleptoligarchy can go off the cliff, and the into the abyss of HELL for all I care.

I owe NOTHING to this crooked country from my perspective and have lost all allegiance.

Both sides of the aisle can go fuck themselves, better yet swing from a lamp post.

Mon, 01/07/2013 - 00:24 | 3128715 Uber Vandal
Uber Vandal's picture

Back in the day, and even to this very day, I listened to Megadeth, Metallica, Slayer, Anthrax, Suicidal Tendencies, Dead Kennedys, Type O Negative, Nine Inch Nails, Marilyn Manson, Skinny Puppy, Ministry, and other bands that were often dismissed as being noise, or worse.

Funny thing is, so much of what was said in the music by those groups 10, 20, and 30 years ago is still true today, if not very, very accurate.

The lyrics of Megadeth, the song Dread and the Fugitive Mind pretty much sum up this article tonight:

Let me introduce myself I'm a social disease
I've come for your wealth, leave you on your knees
No time for feeling sorry, I got here on my own
I won't ask for mercy, I choose to walk alone

What's yours is mine and what's mine is mine too
If you shake my hand better count your fingers

What if I do get caught? What if there is no judgment?
If I'm right I lose nothing, if you're right I lose it all
I ought to get caught because I'm doing something wicked
I'm guilty haunted by my fear and the only consequences
Are Dread and the Fugitive Mind

You built walls to protect you so no one will infect you
Pursued by those out there that vanish in thin air
Come a long way to find what you really left behind
You don't know when the end is but it's coming fast


And, Hook in Mouth was simply great, about revisionists....


A cockroach in the concrete, courthouse tan and beady eyes
A slouch with fallen arches, purging truths into great lies
A little man with a big eraser, changing history
Procedures that he's programmed to, all he hears and sees
Altering the facts and figures, events and every issue
Make a person disappear, and no one will ever miss you

Rewrites every story, every poem that ever was
Eliminates incompetence, and those who break the laws
Follow the instructions of the New Way's Evil Book of Rules
Replacing rights with wrongs, the files and records in the schools

Mon, 01/07/2013 - 01:29 | 3128814 spooz
spooz's picture

Chris Hedges, 2008:

" The corporate forces that are looting the Treasury and have plunged us into a depression will not be contained by the two main political parties. The Democratic and Republican parties have become little more than squalid clubs of privilege and wealth, whores to money and corporate interests, hostage to a massive arms industry, and so adept at deception and self-delusion they no longer know truth from lies. We will either find our way out of this mess by embracing an uncompromising democratic socialism—one that will insist on massive government relief and work programs, the nationalization of electricity and gas companies, a universal, not-for-profit government health care program, the outlawing of hedge funds, a radical reduction of our bloated military budget and an end to imperial wars—or we will continue to be fleeced and impoverished by our bankrupt elite and shackled and chained by our surveillance state."

Mon, 01/07/2013 - 09:35 | 3129166 Seer
Seer's picture

I like Chris for his outing of the crimes of militarization and his desire to crusade for justice, but I think that he still misses the fact that all of the underlying problems stem from growth.

No matter the solution, whether it's "pure capitalism" or his "uncompromising democratic socialism," the same end will become of us as long as we continue to miss the flaw in the driving premise.

I suppose that I could say that it would be like two sheep and a wolf voting on what's for dinner.  Well, um... I'm starting to think that sheep need to be armed...

Mon, 01/07/2013 - 11:37 | 3129375 spooz
spooz's picture

Chris Hedges on GROWTH:

"The ceaseless expansion of economic exploitation, the engine of global capitalism, has come to an end. The futile and myopic effort to resurrect this expansion—a fallacy embraced by most economists—means that we respond to illusion rather than reality. We invest our efforts into bringing back what is gone forever. This strange twilight moment, in which our experts and systems managers squander resources in attempting to re-create an expanding economic system that is moribund, will inevitably lead to systems collapse. The steady depletion of natural resources, especially fossil fuels, along with the accelerated pace of climate change, will combine with crippling levels of personal and national debt to thrust us into a global depression that will dwarf any in the history of capitalism. And very few of us are prepared.

“Our solution is our problem,” Richard Heinberg, the author of “The End of Growth: Adapting to Our New Economic Reality,” told me when I reached him by phone in California. “Its name is growth. But growth has become uneconomic. We are worse off because of growth. To achieve growth now means mounting debt, more pollution, an accelerated loss of biodiversity and the continued destabilization of the climate. But we are addicted to growth. If there is no growth there are insufficient tax revenues and jobs. If there is no growth existing debt levels become unsustainable. The elites see the current economic crisis as a temporary impediment. They are desperately trying to fix it. But this crisis signals an irreversible change for civilization itself. We cannot prevent it. We can only decide whether we will adapt to it or not.”

This rest of the piece details his discussion with Heinberg.

Mon, 01/07/2013 - 11:27 | 3129441 H E D G E H O G
H E D G E H O G's picture

EWE  might not be armed, but this sheeple is. Thanks in advance for the green arrows.

Mon, 01/07/2013 - 05:42 | 3128967 KingTut
KingTut's picture

E. Warren is right when she says you didn't get rich alone.  The idea doesn't even make sense.  If you have money, that money was created by a bank, not you. So unless you're counterfeiter, you didn't make that money yourself.  We live in a society, and we have to utilize the skills and labor of other people to accomplish big things. 

However, without the entrepreneurs, all those workers would be sitting on their ass collecting welfare.  It takes leadership, vision, courage, and a lot of very hard work to build a factory and run it.  Everyone tells you how, but couldn't do it themselves.  Nobody tells you what to make, you have to figure that out for yourself.  And nobody tells you how to manage a business for a profit, because if they could they would.

It is a simple fact, that all people are NOT created equal.  We should all be equal under the law, but we are obvisouly all different in reality. Some of us are very intelligent, others have great people skills.  Some of us can pitch a baseball, run 100 meters or drive a race car like no one else.  Some of us are artists, singers and writers.  And some of us create vast amounts of new value by organizing and inspiring others in a productive way.

And if by taking a tiny fraction of the monetary profit for ourselves, we have not committed a crime.  We have not broken a covenant with our fellow men.  So should rich people pay more tax?  Sure.  A flat tax would be the fariest, but since there are a lot of hard working lower class people, we give them a tax break so they can become wealthier, educate their kids,  buy a house or start a busnesses.  When it works its a win win for everybody.

It pisses me off that Mitt Romney paid a 13% tax rate because he could leave money in the company for a year, and the captial gain status was passed through to him.  That's bullshit.  He should pay the max rate, 35%, like other poeple who can't shelter their income.   It pisses me off that dividends are taxed twice, they should tax free to the corporation, and ordinary income to the recipient.  Social security sould be taxed at 100% for the wealthy.  

But the idea that an entrepreneur that builds a factory and employ's 100's of people because he KNEW what to build and HOW to build it, takes more than he gives is ABSURD beyond belief.  Without people willing to take huge risks for their personal welfare, and work their butts off for years, we would all be eating acorns and cockroaches and living in a cave.  Then Ms Warren would really have something to complain about.

Mon, 01/07/2013 - 06:50 | 3129015 Seer
Seer's picture

It's all insanity because it's all built on top of a fucking HUGE LIE: that we can have perpetual growth on a finite planet.  No "side" here, if operating from this premise, can really claim to be any "solution."

"However, without the entrepreneurs, all those workers would be sitting on their ass collecting welfare. "

Bull shit.

Look around and see what nature does.  "Workers" work, and, there's little in the way to suggest that "workers" are engaged as such via "entrepreneurs."

"Entrepreneur" is just another word used to condition the masses to engage in the hierarchical structure that TPTB requires.

All of this is just PURE distraction from looking that the REAL problem, the problem of basing our collective systems on the necessity of maintaining the aim of perpetual growth on a finite planet.

"Without people willing to take huge risks for their personal welfare, and work their butts off for years, we would all be eating acorns and cockroaches and living in a cave."

Um... in nature (the world that isn't subject to our intellectual distortions) living things have to SURVIVE by whatever means necessary.  "Risk" isn't, per se, some sort of calculation to base some notion of a "future" on.

Nature has been here far longer than we, and, will be here long after we're gone.  When viewed through the lens of this undeniable reality the notion of "working" one's "butts off for years" in order to keep from "earing acorns and cockroaches and living in a cave" seems a bit more than fragile.

Having said all the above, I have no problem with the IDEA of "entrepreneur."  I believe that the REAL essence of this word is in ACTION, as in applying one's energies toward "constructive" purposes, with SURVIVAL being the supreme target of "constructive purpose."  I do not, however, buy in to it as TPTB wish us to: as a method of maintaining THEIR hierarchy.

Mon, 01/07/2013 - 07:27 | 3129023 Ghordius
Ghordius's picture

seer, I was making some direct support noises in your direction lately because I very often agree with you - keep posting

nevertheless beware, this "perpetual growth" thing is a bit misleading, imho

"growth" is measured in "units of value" (I know, I know)

when something becomes more scarce, it's often valued more - and so economic agents start to look for substitutes

so it is theoretically possible to achieve "eternal growth", just not in that form that was envisioning a couple of badly insulated mansions and a huge gas-guzzler car park for everyone, with an helicopter and a plane as 21st century add-on

even now you'll find youngsters that value their smartphones more than a car, as a stupid example

generational preferences might shift and adapt in an economy still valuing today's output more than yesterday's

Mon, 01/07/2013 - 07:50 | 3129041 Seer
Seer's picture

Thanks for taking the time to engage here!

I'm still struggling with the notion that there can be ANY growth w/o there also being an increase in the extraction/consumption of physical resources.

I understand the notion of expressing things in book numbers, but somewhere it HAS to equate to the PHYSICAL, does it not?

I also understand that there can be increase in book numbers based on gains in "efficiency," but as Jevons Paradox states, this is (almost?) always accompanied by an increase in the overall output of that which is being produced: always a net increase in consumption.  And in general everything is geared toward achieving higher rates of output, as this gives us "economies of scale."

"even now you'll find youngsters that value their smartphones more than a car, as a stupid example"

I'm not sure how to measure this comparison without actual numbers.  I don't believe that measuring/comparing simple one or two sets of items can prove any Big Picture view of things.  Better is to look at historical graphs of the production/consumption of natural resources: these tend to be fairly consistently showing as "up and to the right," approaching the classic hockey stick projection.

"Valuation" is too "virtual" when everything hinges on physical inputs.  And this is the point about PMs being more meaningful than fiat- basing valuations on the PHYSICAL rather than the VIRTUAL.

Mon, 01/07/2013 - 08:33 | 3129056 Ghordius
Ghordius's picture

the problem of "equating to the physical" is a thorny one, but let me make an example

let's say Jim is a bachelor, and a horny one to boot, with a weak spot for "working girls"

let's say that Jim values everything "in units of his effort", i.e. in fractions of his income - and he allocates 50% of it for this, his preference

you could describe what he gets from the girlz as "physical" and as "love", but it's a service. and what are they going to do with it? if they spend most of that income for nail studios and other services, how "physical" is this part of the economy? haircuts, for example? a doctor's or lawyer's advice? insurance? banking?

to come back to Jim, for him "growth" and "happiness" is getting twice as much "love" for the same unit of his efforts

all I want to say is: be aware of the immense amount of "services" in the economy, and their impact on the "Big Picture" (another reason why I often analyze trade patterns of physical goods and services separately)

politically and personally, a commodity backed currency like those of the 19th Century meant for example that certain service providers had often a depressingly decreasing "pricing" for their services - something that does not phaze PC and smartphone producers but can make lots of girlz unhappy ;-) unless they are smart savers, that's it

now, seriously: personal valuation is the starting point of every economy, and the basis of trade - independently from virtual or physical

I can go on in detail, if you want, but if you want to read yourself: Carl Menger, the very founder of the Austrian School - who I call the last true economist on Earth. even wikipedia can't spoil his simple but clear explanations

Mon, 01/07/2013 - 08:56 | 3129100 Seer
Seer's picture

You cannot treat services as though they are w/o physical inputs/outputs.

The "john" had to produce enough (surplus) in order to obtain this service.  During such production "john" had to utilize PHYSICAL items (at a minimum - eat).  The "trick" has to obtain various PHYSICAL resources to enable the service.  This service, therefore, DOES require the PHYSICAL; yes, all the actions have the pieces in place and the conclusion of the actions do not result (hopefully) in the production of any PHYSICAL product.

"now, seriously: personal valuation is the starting point of every economy, and the basis of trade - independently from virtual or physical"

BUT!  "personal valuation" STILL doesn't mean anything as pertains to numbers.  I get the notion of economics.  What I'm trying to convey is that our attempts at valuation are highly distorted by the fact that we base our economic activities on the assumption that we can perpetually grow.  This ASSUMPTION can only be described as VIRTUAL.

"I can go on in detail, if you want, but if you want to read yourself: Carl Menger, the very founder of the Austrian School - who I call the last true economist on Earth. even wikipedia can't spoil his simple but clear explanations"

I don't NEED/REQUIRE an "education" on Austrian economic theory.  I GET IT!  And while it is better than others (as I see it too), that doesn't mean that it's correct.  Again, it's ALL operating on the false premise of perpetual growth on a finite planet.  If one can accept a false premise then pretty much ANY argument could be made for ANY positions based on said false premise.

When "economies of scale" start breaking down (I refer to this as "economies of scale in reverse") people aren't going to be debating the merits of economic theory.  Further, what we might see as "proper" conduct (property rights and such) will also become fairly meaningless (really, if there's not enough tax collections happening to fund the police and legal entities it then falls to one of two "solutions:" 1) Self protection; 2) Hired protection; and this doesn't cover the "legal" activities).

Rather than attempt to face these hard questions people tend to dismiss them as my attacking the theory/ideology.  If you cannot figure these things out then I assure you they have ZERO chance of delivering what is claimed (and, you're not likely to gain converts; and while some might say that they don't care, I have to ask how one expects to implement some alternate solution w/o acquiring sufficient mass support).

In math there are PROOFS.  In economics there is no such thing (at an all-encompassing level): the operating parameters are WAY too expansive (and no one appears able to figure out how to factor for limited resource, for the social breakdowns); maybe, MAYBE, had everything started out with a proper understanding/application then me might have something, but that isn't the case, AND, I see little possibility of displacing an existing system such that there wouldn't end up being issues of re-re-distributing assets).

Mon, 01/07/2013 - 09:12 | 3129124 Ghordius
Ghordius's picture

I have to make a difference between Carl Menger and the rest of the (later) Austrian School. he provided logical tools to analyze the economy as-it-is, later his followers made partial messes and improvements out of it

yes, some economies of scale are fragile, and fragile things have this nasty habit of breaking (Taleb is hoarse from repeating it)

I agree, all services have some physical input, and yet all economies free up labour from physical to services when growing, making the physical part of the economy seeming less relevant - the same way the fundaments of a house keep it whole, unseen

and yet this is the direction, empirically - all I mean is: careful with the "physical over all the rest" meme

to put it differently and back to the point: an economy can "grow indefinitely" while the partecipants preferences and valuations shift away from physical to virtual - or just away from the "old" physical. all that has to happen is that the partecipants value today more than yesterday

energy is by far a more limiting factor than commodities, and yet this strange magic would apply even with decreasing energy imputs

Mon, 01/07/2013 - 10:24 | 3129256 Seer
Seer's picture

"to put it differently and back to the point: an economy can "grow indefinitely" while the partecipants preferences and valuations shift away from physical to virtual - or just away from the "old" physical."

Again, if we base things only on the virtual then, yes, there can be perpetual growth (well, until the planet collapses- which will predate the burning out of the sun). This is pretty much what we've been doing: which also requires virtual economic tricks to pretend that we're "growing."

For some reason I thought that people here were bothered by the fact that the economy is based on nothing, and that the concern is that it's not an accurate reflection of reality.

A FALSE economy can APPEAR (through various misrepresentations/deceptions) to grow indefinitely, but this is not the same as actually growing.  A REAL economy would be based on reality, and in the real world there HAS to be an increasing consumption of PHYSICAL resources in order to support growth.

An example would be that everyone were hairdressers/barbers.  The "economy" might reflect lots of activity for a while, but eventually this isn't going to hold up as there is no real consumption happening (no farmers?).

"energy is by far a more limiting factor than commodities, and yet this strange magic would apply even with decreasing energy imputs"

Isn't energy a commodity?

Anyway... the equation is: energy + raw materials + process (application of technology) = product

Energy isn't more important than raw materials or process (though it can play two roles- raw material AND energy).  An insufficiency in any of these compromises the end product.

Mon, 01/07/2013 - 12:25 | 3129641 Colonial Intent
Colonial Intent's picture

+100 to you both for helping my understanding of the subject.


Mon, 01/07/2013 - 06:26 | 3128997 Seer
Seer's picture

Kind of strikes me as funny(?) talking about the piousness of "property rights" when the bulk of property was stolen in the first place.

"Fair Share" was in essence what the "Civil Rights Act" was about.  TPTB had a 150 year head start to amass control and property and then says "we're all equal."

At what point do we NOT go backwards to unravel the crimes?  "Silly" you say?  OK, fine, then let's just move forward and not whine about the "past," about the recent bankster thefts.

Mon, 01/07/2013 - 07:29 | 3129027 Ghordius
Ghordius's picture

isn't "Fair Share" nothing else than a complicated rant about taxes, at the end? I'm including the inflation tax and the banking systems method of skimming it, to that

Mon, 01/07/2013 - 08:11 | 3129050 Seer
Seer's picture

Somewhere along the line there has to be SOME measure of how limited things are consumed.  In nature it's generally done through deception and strength.  And given that humans are OF nature, I don't see it being any different.  That is, ALL of it is an attempt at deception.  And most here would point at a given "side" and state that it's That side that is practicing it.  I, on the other hand, understand human nature/nature and believe that ALL are engaged in deception.  I very much doubt that if Petrovski were dirt poor and standing on the street corner that he/she would be writing about this.  My POINT is that when it's a matter of SURVIVAL all of this ideological stuff is just another mechanism of deception (someone trying to obtain, rightly or wrongly, more of what they believe is Their share).  Yeah, I fully understand our attempts at providing some fair level for competition, but, as we can see all around us (and even outside of us- nature), it's really no more than wishful thinking (self-deception?), as our supposed social contracts are abused left and right (and this is increasing as resources get tighter- when resources are plenty people don't seem to care about whether others are obtaining "more," whether doing so "legally" or not).

Like others here, I too can speak words that sound good (and may be acceptable to others- in tune with the choir), but that doesn't make them automatically pass the test of logic

There's the joke that democracy is two wolves and a sheep voting on what's for dinner.  While we may laugh at this it doesn't address the reality of what happens when living things are hungry; this is where civility, a virtual construct, breaks down and the very notion of "rights," "voting" and "taxes" become totally meaningless.

Mon, 01/07/2013 - 08:48 | 3129075 Ghordius
Ghordius's picture

one thought for you: republics based on democratic principles are based on what we call politics

and politics is based on trade of (political) support

I have three key issues, you have three key issues, and Jim has three key issues

I trade my support for two of your key issues where I am indifferent for your support of two of my key issues

the problem of this complex trading is that you have to put up a market for that, one voters can follow

the way the US pre-1913 solved it was to set up A) two  B) very efficient markets for that

A) the states and the federation, i.e. the "local" and the "global", i.e. for the "small" and the "big"

B) the first-round-the-post voting system favouring "aggregated", big parties

as the 17th Amendment was introduced, this system's balance broke down, it became more efficient but less effective

and so the rot set in, slowly, slowly - because the political "market" shifted from this balance to "bigger", moar

this because the "aggregates" of the local political deals were protected by the states's recallable delegates in the senate

as for Nixon's Magic Trick of 1971, those things have an unsettling penchant to go unnoticed for generations - until they blow up

I maintain that the Founding Fathers would agree with me on this

Mon, 01/07/2013 - 08:58 | 3129104 Mr. Lucky
Mr. Lucky's picture

Just for grins I did a quick look for income tax rates from 1913. 

The maximum rate was 7% for incomes over $500,000.00.

Mon, 01/07/2013 - 09:15 | 3129130 Ghordius
Ghordius's picture

that's the federal taxes - they were quite new, then

look up how much people paid in local and state taxes, where the bulk of the expenditures were

Mon, 01/07/2013 - 09:23 | 3129143 Seer
Seer's picture

It's NOT "trading" that I have a problem with.  It's where it's all heading that I'm trying to question!

All the talk is no more than placing a "good" layer on a bad underlying premise.

Governments are no more than a collection of people, people whom have acquired more power than naturally available (well, some WERE born into positions such that they commanded higher status/rule over others).  As soon as the notion of "privledge" there are problems.  This notion doesn't change should the size of government change.  Further, it need not necessarily manifest it only in "government."

The "rot" set in slowly because that's how the exponential function works.  It gains speed over time.

The promotion of growth begs for the engagement of the exponential function.

"I maintain that the Founding Fathers would agree with me on this"

The Founding Fathers (some of them I like) could agree with you, but that's still not the ultimate litmus test.  I'll make the claim that Mother Nature would agree with me.

"Men argue, nature acts." - Voltaire

"Whether we and our politicians know it or not, Nature is party to all our deals and decisions, and she has more votes, a longer memory, and a sterner sense of justice than we do." - Wendell Berry

When our underlying cause is for survival all our words are merely in service of this cause.  In the face of survival one would no more debate with a lion about what a lion should or shouldn't eat as one wouldn't be debating economic theory with a starving person who has the jump on you.

Mon, 01/07/2013 - 07:55 | 3129042 Cloud9.5
Cloud9.5's picture

A thief has lawful claim against all others except the lawful owner. Without property rights you have Zimbabwe.

Mon, 01/07/2013 - 09:26 | 3129152 Seer
Seer's picture

"Without property rights you have Zimbabwe."

And with them you have drones and air-strikes (which one gets to pay for).

I suppose that one has choices...

Mon, 01/07/2013 - 07:59 | 3129045 smacker
smacker's picture

"...the idea of the “fair share” is simply a reiteration of the “from each according to his abilities, to each according to his needs” idea."


But what the Lefties who peddle this mindless tripe choose to ignore (because it doesn't buy votes) is that if a man is not rewarded for his ingenuity and hard work in setting up a business or inventing something which goes viral (or has his hard-earned wealth removed from him by force) or for wading through countless regulations - many of which seem designed to stifle inventiveness - is that he will either emigrate to a country that does appreciate his efforts or will simply join the masses living on their "fair share".

Either way, his home country will be the loser. And quite soon there's nobody left to produce the wealth to fund the "fair share". Welcome to socialism.

Mon, 01/07/2013 - 08:19 | 3129064 Seer
Seer's picture

If whatever you're basing your position on is based in the necessity of perpetual growth on a finite planet then you're in no position to point fingers.

But, some, I suppose, feel it necessary to run with packs.

Clowns to the left of me, jokers to the right...

Mon, 01/07/2013 - 09:02 | 3129111 smacker
smacker's picture

Well, I didn't base my position on the presumption of perpetual growth, and that issue is not closely related to my view. Even in a world of finite growth, renewal of the products and such like that we buy and use every day will always continue.

But 'someone' has to put in the time and effort to manufacture X more cheaply, using better or cheaper materials, at lower cost or to invent a better replacement etc. That 'someone' may be an existing company or a new start-up. He deserves and is entitled to be rewarded for his efforts, otherwise where's the incentive? Confiscatory taxation to fund a "fair share" for all simply invokes the consequences I mentioned earlier.

Fact is that we are not all born equal in skillsets and each of us needs to face up to our skills, strengths and weaknesses early in life and plan a career accordingly to maximise them. EG: this is why I never went into politics...I simply wouldn't have lasted very long.

Mon, 01/07/2013 - 12:06 | 3129578 Colonial Intent
Colonial Intent's picture

Explain how capitalism continues to function in a finite growth paradigm and i'll give you an up arrow.

You would be perfect for politics, all you need is integrity, then each day at the office you will compromise your integrity to acheive a result, sometimes the result is good and sometimes its bad, then one day (if you get re-elected) you turn up for work and realise you have lost all your integrity and at that point you pack it in and take up gardening or reading ZH or you start fiddling your expenses and screwing people over.


Mon, 01/07/2013 - 21:06 | 3131334 smacker
smacker's picture

hhmmm. I'm not an economist, so I'm struggling here....and I'm not at all sure we've reached the limit of growth, just a pause.

1. In a paradigm of finite growth, personal/corporate/govt debt has to be seriously scaled back. A lot of bad stuff is conveniently hidden by so-called growth; any politician knows this. Lots of other issues too I guess. Apart from that, capitalism as a model continues as I briefly described earlier. Socialism adds no value to any model because it acts as a disincentive to work/ingenuity/taking risk and that is the very last thing we need. As Churchill said (paraphrased) "socialism achieves equality of impoverishment".

But methinks a big problem with flat growth would be providing jobs for young people with an expanding population.

2. I wouldn't be much good in politics even though my dear old mom reckoned I would be. I'd spend my time fighting the system like Ron Paul. The reason is that I see so much about the current political model which is bollix. I mean complete and utter bollix. EG: I know of no economic/societal measurement which is usefully close to reality (GDP, CPI, Crime, Unemployment etc etc); they're all rubbish. Every measurement of 'where we're at' has been corrupted by the political elites over the years to fool the electorates. It's no wonder we are where we are.


Mon, 01/07/2013 - 08:13 | 3129055 spanish inquisition
spanish inquisition's picture

I am gonna guess that the government thinks your "Fair Share" is about 100% of what you make.

Mon, 01/07/2013 - 08:44 | 3129086 Element
Element's picture

Almost! The more complete answer is, "we own you".

Mon, 01/07/2013 - 08:23 | 3129068 Tango in the Blight
Tango in the Blight's picture

What's wrong with paying toll for travelling on roads, bridges etc. and paying admission if you want to go to walk your dog in the park?

You wouldn't be paying taxes to maintain them. If you don't use them you don't pay for them.

Tue, 01/08/2013 - 00:27 | 3131784 Element
Element's picture

Really? You can't work out there's a fundamental psychopathic-sociopathic sickness in 100% financialisation of everything on earth?

The problem with logic, touchy-feely socio-economic logic in particular, is that it only works within definitive limits, but as soon as the limits are imaginary, or it has to encompass actual reality, it always blows-up into serial insanity in practice.

Mon, 01/07/2013 - 08:52 | 3129092 Quinvarius
Quinvarius's picture

Collectivism means your fair share is 100%.

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