Wednesday, December 26, 2012

The Creators of Wealth

Bryan Caplan proposed this libertarian thought experiment:

Suppose there are ten people on a desert island. One, named Able Abel, is extremely able. With a hard day's work, Able can produce enough to feed all ten people on the island. Eight islanders are marginally able. With a hard day's work, each can produce enough to feed one person. The last person, Hapless Harry, is extremely unable. Harry can't produce any food at all.

Questions:

1. Do the bottom nine have a right to tax Abel's surplus to support Harry?

2. Suppose Abel only produces enough food to support himself, and relaxes the rest of the day. Do the bottom nine have a right to force Abel to work more to support Harry?

3. Do the bottom nine have a right to tax Abel's surplus to raise everyone's standard of living above subsistence?

4. Suppose Abel only produces enough food to support himself, and relaxes the rest of the day. Do the bottom nine have a right to force Abel to work more to raise everyone's standard of living above subsistence?

Evolution ensured that the real world is nothing like this. There are Hapless Harrys today, of course, but most differences in wealth accrual are only slightly related to absolute ability.

If Able Abel achieves ten times the productivity of the average worker on his island, it's because he managed to seize control of some scarce and valuable resource, for example, a highly productive pond that produces most of the Islands food. Whether he managed this control by first discovery, military conquest, or dumb luck, it is what gives him productive advantage. In short, Able Abel is probably really just Rentier Ron with a good publicist.

I think that fact changes the moral calculus a lot.

The very rich seem supremely confident that they are the creators of the vast wealth from which they extract their tithe - or, more usually, double tithe plus management fee. In fact, they are almost as dispensable as the lowliest worker in their empires. True, they achieved their position by wit, pluck, and luck, but there are plenty more right behind them who could have done as well, or almost as well. They are the winners of the rentier tournament.