Economic Pandas and Earned Success

"Earned Success" is a term Arthur Brooks, president of the American Enterprise Institute (AEI), author of the new book "The Battle" and recent guest of The Daily Show, uses to promote the benefits of the free market, and I must say, I love the concept. His theory is that people are not made happy by their income level (money doesn't buy happiness), but rather by their level of earned success. This idea is ancient wisdom and is intuitive to the point of being obvious, but is still meaningful and thanks to Mr. Brooks is well backed by data. A quick example is that a person who's just won a million dollars in the lottery will be less happy and feel less successful than somebody who has built a company from the ground up and earned their first million dollars. Simple, yay, go free market!

The ultimate point of the theory is that by giving away money (welfare/entitlement), we are stripping citizens of their right and incentive to earn their own success, and thus their equal right to pursue happiness. Furthermore, the best system is one which gives the most incentive for earned success, which is almost by definition the free market. Very interesting idea.

A Lengthy Aside to Present Some Background Junk: The free market is survival of the fittest for economics. It's a ruthless trial by fire, and even in nature we no longer play by those rules. We provide a safety net and rules to ensure fairness, particularly in cases such as invasive species and over hunting, where we're the primary cause of a species's failure. When goats started eating all the grass in the Galapagos, destroying the food source and population of the tortoises, we killed every last goat on the islands to rescue the species. When the very aggressive snakehead fish were introduced to America we poisoned entire ponds in an effort to kill them. Right now we're doing everything we can to eradicate the tamarisk tree from the shores of the Colorado River as it absorbs as much as 30% of the river's water, water we need to survive. We also take measures to reverse the rules of natural selection in some naturally occurring cases (*cough* PANDAS!).

The whole of economics is a human invention, so it's harder to point to the unnatural culprits. For the sake of argument, I might say the invasive species of economics are corporations who outsource to countries where labor is cheap and working conditions are unregulated (or a few generations ago, the slave traders), or those who hire illegal immigrants. The commercial fisher equivalent would be companies commanding fleets of employees and are so large that they affect the rules by which we all play (monopolies, major corporations particularly before unions, special interest groups). And the poachers are any company that takes advantage of the unwitting (sub-prime lending, ponzi schemes, pyramid schemes). Then there are those who are the pandas of society who are just incapable of surviving, which leads us back to the topic at hand...

The Topic at Hand: Luckily, Mr. Brooks has saved me a lot of arguing and filled me with much faith by saying, "The free enterprise system needs rule of law, and it needs a smart government with good regulation. That's a fact, anyone who says that you either have to have pure socialism or pure free enterprise isn't living in the world." Excellent, he's not Rand Paul, and supports a view of the free market that I can find a lot of common ground with. On to "Economic Pandas." Who are they and what to do with them?

Welfare and government assistance programs are appropriate for people who are either disabled, or have the drive to succeed and may or may not have the skills to succeed (the economic equivalent of the sick, injured, and young. "SIYs" for short). Aid can help those who are legitimately unable to provide for themselves, or may give others in this group the push they need to succeed. They are not the pandas. Then there are the people who could succeed but prefer to mooch off the system (ie: I know a guy who was in Iraq who is now perfectly healthy but continues to claim post traumatic stress so he can smoke weed and play video games all day). These are the parasites, the fix is simple but not easy: identify them and STOP giving them money! Problem solved. Then there are those perpetually in need of assistance because they have neither the skills nor the drive to succeed, and/or have god awful money management that is perpetuated by this economic safety net. These are the economic pandas, and are the hardest to help.

The liberal solution has been to throw money at the whole lot of them, because it is very hard to differentiate between pandas, the parasites and the SIY group. This is apparently not that effective, as it has been the solution for decades and poverty persists in large numbers. The conservative solution appears to be "earned success." Fantastic... how do we do that? How do you motivate a panda to stop being a panda? Sounds a lot like the "give a man a fish, feed him once, teach a man to fish, feed him for life" theory. How do you force underachievers to achieve? Set up non-profit career training and development centers? Already being done, minimally effective, but perhaps their ineffectiveness is due to the fact that the pandas already receive funds, cutting their motivation to participate. Then put a time limit on the funds. Already being done, but only in certain applications, could be spread across the board. Hmm, maybe starting to get somewhere.

I obviously do not have the answer to this problem, but does there exist any real proposed alternative to welfare beyond "cut them off"? I hear a lot about giving them the incentive, but what about the means? And to what extent should this be available? If it's too easy to take advantage of, people may opt for these programs over some state schools. Crime may also be a more attractive option, so I would suggest making prisons even less appealing. In my head, there could be court ordered enrollment, a forced repayment schedule after completion of the program, and reduced spending on living standards in prisons (ie: if they consume 2000cal/day make it 1500cal/day, and cut progressively by security level. Requires research obviously).

I have been unable to find any real proposals relating to promoting earned success. Send me a link if you know of one. Has anybody read "The Battle," and is there a proposal in there? Anyway, the idea sounds compelling, let me know what's out there. Thanks

~Yasu

Taxes and Benefits

Taxes taxes taxes. Today's post has been inspired by a conversation some co-workers were having as I strolled into work (only 15mins late today!). The convo go cut short because we all had to get back to work, but here's the basic gist of what I think the two opposing sides were saying.

ALL OPINION, totally void of facts!... well almost:
Both sides agree that taxes should be "fair," but how they define fair is vastly different. Should the rich pay more because they can, and its only because of their forced generosity that our country is able to operate? Should we all pay the same amount because the poor receive more benefit while paying less taxes, and as an incentive to be a productive member of society, should those who have earned their fortunes be allowed to keep them?

In short. Yes.

Flat taxes that affect all people equally are almost by definition fair. The amount of taxes charged is proportional to the value of the goods or services provided, regardless of who is receiving it. If I buy a car I'll be taxed just as much as if a millionaire buys that same car. There's some equality.

So, where is the fairness in taking more money from society's most successful... just because they're more successful!?! Shouldn't success be rewarded, should there not be an incentive to be the wildest success you can be, and innovate yer a$$ off all the way to the bank? And isn't America the land of opportunity where your place in society and your success is determined by your talent and hard work?

Yes and Yes.

Furthermore, aren't the rich less likely to cash in on government funded programs? They have private schools, purchase their own health insurance, purchase their own homes and home insurance, live in gated communities, don't go to prison (guilty or otherwise, cuz their lawyers cost a TON!). Rich people basically just need police, military, road and park maintenance, and need illegal immigrants out, which isn't even being done. So why is it that they provide the largest share of tax dollars to programs they won't use?

Argument 1: Earlier, unless you disagreed with me, we answered Yes and Yes to providing incentives to succeed, and to America being the great land of opportunity. I say the two are self-reinforcing; America has provided the incentive for working hard by giving you that framework in which you can succeed and become rich, and because America is great, we are obligated to give back to her and KEEP her great with a portion of the wealth she has given us the opportunity to make. Tadah! Born into another country, into another family, Steve Jobs might be revolutionizing the world of riveting grommets into sneakers. And honestly, born into the wrong family in THIS country he might be revolutionizing the world of janitorial services. Success is not just the product of talent and hard work, but also environment, and dues should be paid.

Argument 2: I make a good amount of money and pay taxes accordingly, and I still have WAY more than I need to get by. I enjoy life, spend as freely as I want on my vacations, and have some fairly nice stuff at my place. People who make more than me, no matter how high their taxes, STILL MAKE MORE THAN ME! And I make less than half the $250k Obama threshold of wealth. Still there are so many rich people who donate money to charity or starving children funds or to the warm fuzzy make me feel good about myself funds, whatever, but they bitch like hell about being over taxed! As if any of those causes should come before the needs of the country. Traditional American beliefs say, 'honor your God, Family, and Country and in that order'. Not 'honor yourself, family, shelter animals, the whales, African orphans, breast cancer, and save some for your country.' How many conservatives do you know who fit this description? How many of them are on the "bring America back to its roots and core values upon which it was founded" bandwagon? To continue the theme from the Arizona post, they follow the most traditional of American values, GREED!

Ok, so if I'm lucky maybe half of you are in agreement that we owe some money to the government, but why do the rich owe more than the poor? They don't, but like any family this country needs X amount of dollars to get by, and it's sure not getting it from the people who need government money just so they can get by. Equal payment from the members of this country would be the equivalent of a father demanding equal payment for bills from his wife, children, infants, pets (haha, though in this analogy each adult, child and pet would have an equal vote in how the household is run and opperated :P ...ignore the absurdity there, cuz for better or worse, that is actually how America is run.).

So who's it going to come from? That's right. It sucks, but that's how it is. Should rich people get a medal of honor or a Christmas card for keeping this country afloat? Absolutely. Does it suck that it gets taken without their permission? Definitely. Would they give it to the government if they had the choice and the government asked nicely? Probably not, that's why the gov takes it. Should they get more say in how the country is run because they're the ones paying for it? No, because it's a democracy of equality, but the cool thing for them is that they DO get more say because the rich control the media and sponsor support efforts for bills they believe in. So congratulations rich guys, you are skewing democracy :D INCENTIVE! For those of you rich folk who don't own TV stations, not to worry, there's a good chance they will also support defending your wealth.

The big gripe: "Ok, I'll pay your blasted taxes because I have to. But for God's sake spend it wisely man!" Just as every family needs X number of dollars to get by, every family also has Y dollars WASTED! How do you determine which tax dollars fund X and which fund Y? Ohoo, that is a much longer blog than I care to attack today. But do consider two things when paying them and you may at least sleep better at night:

First, the reason we have the largest economy is because we are the largest consumers in the world, and the reason we are the largest consumers is because we have the largest middle class. The more people we can shoulder up into the middle class, the better off we'll be. The welfare reform laws of 1996 were made to ensure that it's not an enabling crutch, though welfare-type spending has been and will continue to escalate in down times and with the expansion of the government.

Second, the taxes we contribute have been voted on by elected officials, so do your crying to your local representatives and contribute money to battle further tax bills and spending bills, your opposition will do the same, and hooray for democracy. But until your side wins it's your duty as a citizen to pay the taxes owed. DO NOT go crashing your private plane into the IRS building. If he spent as much paying for a good lawyer and some taxes as he did on that plane he crashed, he might be better off than dead. Chronic tax evader, not martyr, don't be that guy!

Sentimental Aside: My family fell on hard times and needed a hand once, right after the divorce. I don't dare ask my mom for the details, but I know we received at least some government assistance. That help was enough for my mom to keep us fed, get on her feet, and decades later she, my sister and I are both very productive members of society and paying back into the funds from which we borrowed, with interest. This may not be the norm, but the poor should have a chance to succeed just as much as the rich, and to some extent the welfare programs ensure that right. Even if only 1 in 5 end up succeeding, we'll still come out ahead (my taxes alone likely pays back in a year what my mom received in total, and my mom pays about the same), and will have at least given everyone a fair chance to succeed.

Conclusion: Yes, taxes are necessary, it's unfortunate but the rich have to take the brunt of it without the benefits (truly taxation without representation :\ ), but it goes to a good cause that indirectly benefits the rich as well. In broad general terms I am SURE there is plenty of government and waste and ways to fix it, but until then keep in mind that the "rich" have more than they need, money doesn't buy happiness, and crying about how things ought to be doesn't buy happiness either. That's it for now, perhaps we can attack what is and is not necessary in a later post.

There will be a post on greed coming soon I'm sure, but I would like to finish the economics book I'm reading first to make it more insightful.

~Yasu