Friday, December 28, 2012

The Crucial Difference Between Wealth Creation and Wealth Distribution

From the Wall Street Journal:

In his Dec. 20 op-ed “America’s Dangerous Powerball Economy,” Arthur Brooks quite correctly points out that earned income, indeed earned success generally, affects our happiness very differently than unearned income or success.

I would like to extend his point further with something I’ve told my college students for years.

In general, the creation of wealth is edifying. When only voluntary transactions are permitted, the creation of wealth requires cooperation, and this brings out the best in us.

Piles of wealth, however, tend to be corrupting. The fixed nature of a pile is all about apportionment, not cooperation, and this zero-sum game tends to bring out the worst in us.

It follows directly that no matter how noble the ends, government redistribution (which is hardly voluntary) tends to bring out the worst in us. Rising government redistribution over the past 75 years has produced ample evidence of this point.

We are in this mess because we have allowed our culture to be dominated by those who are bent on spreading the false and self-serving narrative that our economy is a giant zero-sum game…

David C. Rose

Department of Economics
University of Missouri-St. Louis
St. Louis, Mo.

I note that much the same explanation accounts for the way families often squabble furiously over an inheritance while happily accepting the differing earning patterns of family members.

I further note that it is since the 1930s and the introduction of the welfare state that societies such as those found in the west have become increasingly concerned with the distribution of the pie to the point where that distribution now threatens the very production which makes it possible.

Brent

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