23 February 2013
An
economics professor at a local college made a statement that he had never
failed a single student before, but had recently failed an entire class. That
class had insisted that Obama's socialism worked and that no one would be poor
and no one would be rich, a great equalizer.
The
professor then said, "OK, we will have an experiment in this class on
Obama's plan".. All grades will be averaged and everyone will receive the
same grade so no one will fail and no one will receive an A.... (substituting
grades for dollars - something closer to home and more readily understood by
all).
After
the first test, the grades were averaged and everyone got a B. The students who
studied hard were upset and the students who studied little were happy. As the
second test rolled around, the students who studied little had studied even
less and the ones who studied hard decided they wanted a free ride too so they
studied little.
The
second test average was a D! No one was happy. When the 3rd test rolled
around, the average was an F.
As
the tests proceeded, the scores never increased as bickering, blame and
name-calling all resulted in hard feelings and no one would study for the
benefit of anyone else.
To
their great surprise, ALL FAILED and the professor told them that socialism
would also ultimately fail because when the reward is great, the effort to
succeed is great, but when government takes all the reward away, no one will
try or want to succeed. Could not be any simpler than that. (Please pass this
on) These are possibly the 5 best sentences you'll ever read and all applicable
to this experiment:
1.
You cannot legislate the poor into prosperity by legislating the wealthy out of
prosperity.
2.
What one person receives without working for, another person must work for
without receiving.
3.
The government cannot give to anybody anything that the government does not
first take from somebody else.
4.
You cannot multiply wealth by dividing it!
5.
When half of the people get the idea that they do not have to work because the
other half is going to take care of them, and when the other half gets the idea
that it does no good to work because somebody else is going to get what they
work for, that is the beginning of the end of any nation.
Can
you think of a reason for not sharing this?
Neither
could I.
A trite and somewhat
puerile argument, with prima facie features suggesting that the originator of
this longstanding urban myth has no formal economics education. While there
exists an ethical imperative to avoid welfare traps and other perverse
incentive structures, this alone does not constitute a valid case against
progressive taxation and social security.
The true measure of
wealth should not be net worth but rather the utility derived. Due to
diminishing marginal utility, one can actually increase total societal benefit
through redistribution. Conversely, a lack of progressive taxation places
disproportionate burden upon the poor.
In addition to
practical realities, one can even argue that a degree of poverty is
theoretically institutionalised in an idealised society through macroeconomic
needs such as a non-accelerating inflation rate of unemployment. To the degree
that it is an author of poverty, society should bear responsibility for the
welfare of the underprivileged.
While shared reward
theoretically removes individual incentive, empirical evidence suggests less
simplistic a reality. Experiments in social compensation theory have shown that
shared rewarding can cause individuals to contribute less effort, or actually
more effort, depending on the value of the reward1. On a practical scale, international studies have found wealth
equality to be correlated with higher long-term growth2.
Yet another semantic
imbroglio exists here:
- The fall of communism added
practical example to the theoretical argument against Marx's pipe dream.
- However, in the Marxist sense,
we never actually had any communism but only socialism, its supposed
precursor.
- While disincentivised reward
distribution occurred to limited extents in some Marxist states, I do not
feel this need be a major feature of Marxist socialism. On the contrary,
the tenet of Marxist socialism is “to each according to his contribution.”
(The slogan “from each according to his ability, to each according to his
need” pertained only to a hypothetical future post-scarcity economy and is
of no relevance in the criticism of any real socialism.)
- “Socialism” in contemporary US
political debate seems to predominantly refer to reward
redistribution, an inaccurate departure from its original meaning.
I postulate that the
primary theoretical failure of Marxism is not disincentivisation through reward
redistribution but rather the inherent inefficiency of planned economies.
Marxist socialism should not give Obama “socialism” a bad name.
References:
