The Objectivist
FAIRNESS AND WAGES: LET’S HEAR IT FOR THE RICH
Dunkirk-Fredonia Observer
September 11, 2007
In the world of politics, there are a lot of politicians and intellectuals who are convinced that they can pick out fair wages better than the market. Politicians and commentators constantly bemoan the high salaries of CEOs (S&P 500 CEOs averaged $14.78 million in 2006), baseball players (averaging $2.94 million in 2007), physicians (several types of cardiologists and orthopedic surgeons averaged over $400,000 even after expenses), and high-end attorneys (some law firms now charge clients more than $1,000 per hour for their best attorneys). At the low end of salaries, the AFL-CIO and other leftist organizations often criticize third-world sweatshops because they pay wages that are too low.
Even if these politicians and intellectuals could identify a fair wages, it doesn’t follow that employers should be made to pay them. In general, high prices for scarce things (whether labor or goods) usually bring about the best results by increasing supply and better distributing them. Economist John Lott in Freedomnomics uses the example of the rise in gas prices related to the Hurricane Katrina to illustrate this. Katrina disrupted oil production in the Gulf of Mexico. The restricted supply caused gas prices to rise. This rise gave companies the incentive to store gas in anticipation of the storm and then rush it to the area once the storm hit. It also reduced demand thereby making more gas available to those who really needed it. In contrast, government price control causes demand to outstrip supply, which inevitably produces shortages and waiting lines. An example of this was the obnoxious gas lines in the 1970’s that followed President Carter’s price controls.
As a general rule, free market wages are the height of fairness. A free-market wage is the wage that a person gets in a competitive sector of the economy. Generally, this reflects the degree to a worker contributes to lives of other people. This is because a worker’s salary reflects the degree to which others value his goods or services and the degree to which others value his goods and services reflects the degree to which these things make their lives go better. As Walter Williams has pointed out, such a system in effect rewards persons on the basis of what they’ve done for their fellow man.
For example, consider a day-care worker (median wage $7.90 per hour in 2003). There are lots of people willing to do this job and, at least according to consumers’ needs, the performance of one worker is not substantially better than her likely replacement. At least this is what consumers seem to think. Hence, any one day-care worker probably does not provide a service that is substantially better than her likely replacement. In contrast, other workers (e.g., Hollywood stars, CEOs, and sports stars) contribute far more to others’ lives than their likely replacement, which is why they get paid a lot more.
None of this applies to government employees because political considerations, rather than the market, set their wages. Thus in deciding whether veteran professors at state colleges contribute to their fellow man, their salaries are not a reliable guide (in 2003-2005, full professors at public colleges and universities averaged $88,500).
One objection to this claim about fairness is simple outrage. A critic might say that she hopes she didn’t just hear me say that some relatively low paid workers (e.g., day-care workers) really do less for humanity than highly paid but superfluous individuals like NFL running backs and well-known porn stars. But it’s hard to see why she thinks this. The reason the latter make so much more money is that while consumers value the latter’s services only a little bit, they serve millions of people. Oftentimes doing a little for millions of persons does more for the world than doing a lot for a few.
A second objection is that some low-paid workers (e.g., nurses) do far more for persons than others (e.g., Hollywood stars) because the former provide more important goods (health care versus entertainment). This, however, is to confuse what an industry provides versus what a particular worker provides. It is the latter that determines what an individual contributes to the world since she only can provide or withhold her own labor.
A third objection is that the low-paid workers often work from altruistic motives and care for their clients, whereas the highly paid CEOs and all-pro quarterbacks are in it for themselves. Even if true, this is irrelevant. Remember the issue here is the degree to which an individual makes others better off, not why he does it. Caring about others may be a good thing, but this doesn’t make others better off. Rather others are made better off when their wants and needs are satisfied and is what wages measure.
Other theories of fair wages are invariably confused or wrong. For example, various intellectuals think that wages should track the degree to which persons sacrifice themselves for a job or work hard at it. However, plenty of people work very hard at jobs that don’t contribute much to anyone’s benefit. For example, consider restaurant owners who work like dogs and put in incredibly long hours only to have no one show up. It doesn’t seem that fairness would dictate that they be well paid despite their efforts and sacrifices. Physicians often yell that they deserve high wages because they invested so much in their education, but again restaurant owners might have invested their whole life savings and it doesn’t follow from this that they deserve anything.
Other fair-wage intellectuals cite things like a living wage suggesting that persons who work full-time jobs should be able to escape poverty, afford medical care and decent housing, buy a house, etc. The problem is that such goals have nothing to do with whether the worker has served his fellow man. We might want to give all American workers such goods, perhaps in the form of various welfare benefits, but labeling these benefits fair wages hides what is being done.
In a reasonably competitive sector of the economy, wages are a pretty good indication of what workers contribute to others’ lives. Poor people do less for others; rich people do more. It’s a distasteful conclusion, but true nonetheless.
12 September 2007
15 August 2007
Religious Discrimination Against Candidates
The Objectivist
MITT ROMNEY’S MORMONISM: IRRATIONALITY CAN AND WILL BE HELD AGAINST YOU
Dunkirk-Fredonia Observer
August 7, 2007
GOP Presidential Candidate Mitt Romney has made it clear that he does not think that his being a Mormon should be held against him. This is a contemporary version of President John F. Kennedy’s earlier assertion that his Catholicism should not be held against him. Contra Romney, I think that a candidate’s irrational religious beliefs can and should be held against him.
Curiously, Romney said, “We need to have a person of faith lead the country,” which suggests that the country should not be led by an atheist. Let’s leave aside the issue of whether his claims are consistent.
If a person has irrational religious beliefs, then he is less likely than others to make reliable judgments. This is because irrational religious beliefs tend to weaken one’s judgments about rights and liberties in the same way that doctored numbers make it less likely that an accountant will make reliable judgments about a client’s finances. If a person is less likely to make reliable judgments, then he is less likely to make good decisions, and this is not what we want in a leader.
According to Mormon critics such as Richard Packham, http://www.exmormon.org/tract2.htm and those summarized in Wikipedia, Mormons accept the following.
* God has a flesh-and-bone body and lives on a planet near the star Kolob.
* God was once a man and human beings are literally his children.
* Individuals like you and me can become like God and rule over our own worlds.
* Before living on this earth, we were spirits in “pre-existence,” during which we were tested. How we live in this life depends in part on our reward or punishment for our acts in the previous life.
* Jesus and Satan are brothers.
If a person who is not a Mormon becomes Mormon, the Holy Ghost takes out his blood and replaces it with Israelite blood.
These sound irrational to me.
There is nothing new here. We often use a person’s past membership in a group or past behavior as an indicator of how he would perform as a legislator. For example, we would hesitate to vote for someone who was a recruiter and local leader of the Klu Klux Klan or abandoned a woman trapped in an underwater car. This did not stop voters from West Virginia and Massachusetts from electing Senators Robert Byrd (D-WV) and Ted Kennedy (D-MA), but it probably did give them pause.
One objection here is that even if a candidate’s beliefs support our not voting for him, he might still be the lesser of two evils. This is correct. For example, we might still prefer a candidate who has irrational religious beliefs to one who voted for the Iraq war, for restricting free speech on political matters, for amnestying illegal aliens, and against tax cuts, because we are confident that his opponent will make worse decisions. This might occur, for example, if Romney ran against Hilary Clinton.
A second objection is that holding someone’s religion against him violates the separation of church and state. The separation between church and state is often misunderstood. It is a narrow thesis that holds that a person’s legal rights and duties should not depend on his religious beliefs or practices. This is a distinct from the issue of who govern our country. A person’s membership in a private group (for example, the Klu Klux Klan) should also not affect his legal rights and duties, but that is independent of whether we should hold a candidate’s membership against him when we enter the voting booth.
A third objection is that religion is a personal matter and as such it should not be considered. The distinction between personal and public behavior is unclear and in any case irrelevant. For example, it’s unclear whether participation in corrupt business practices is a personal matter, but nothing rests on this issue. What matters is whether this indicates how a person will govern.
A fourth objection is that Mormonism is no more irrational than other religions. For example, consider the following.
* The Father, Son, and Holy Ghost are truly distinct persons from one another and yet there are not three Gods but one.
* There are exactly nine orders of Angels.
* If a priest blesses bread and wine, then it becomes the body of Jesus. Actually does, not metaphorically.
It is not clear that these claims are as irrational as Mormon ones, although to be fair I haven’t turned on my irrationality-meter. However, if these beliefs or ones connected to them reliably lead candidates to reject evolution, deny parental rights to gays, or ignore data on sex education, then we should be less enthusiastic about candidates who accept them.
A fifth objection is that membership in religious organizations is not a reliable indicator of poor reasoning or judgment. The objector might claim that because there are almost no atheists in high office and because we can’t determine which people join religions merely for cultural reasons, religious membership doesn’t reliably indicate anything. Because there aren’t any studies on this topic that I’m aware of, this objection might be fatal. However, it is worth noting that we regularly make predictions based on commonsense connections. For example, we predict that former members of the NAACP will favor African-Americans no matter what. Similarly, we (leaving out West Virginia voters) judge former members of the Klan as likely to have too much animosity toward minorities to trust in office. When it comes to predicting how politicians will rule on things like abortion funding, stem-cell research, and euthanasia, I don’t see why we can’t rely on similar commonsense connections.
MITT ROMNEY’S MORMONISM: IRRATIONALITY CAN AND WILL BE HELD AGAINST YOU
Dunkirk-Fredonia Observer
August 7, 2007
GOP Presidential Candidate Mitt Romney has made it clear that he does not think that his being a Mormon should be held against him. This is a contemporary version of President John F. Kennedy’s earlier assertion that his Catholicism should not be held against him. Contra Romney, I think that a candidate’s irrational religious beliefs can and should be held against him.
Curiously, Romney said, “We need to have a person of faith lead the country,” which suggests that the country should not be led by an atheist. Let’s leave aside the issue of whether his claims are consistent.
If a person has irrational religious beliefs, then he is less likely than others to make reliable judgments. This is because irrational religious beliefs tend to weaken one’s judgments about rights and liberties in the same way that doctored numbers make it less likely that an accountant will make reliable judgments about a client’s finances. If a person is less likely to make reliable judgments, then he is less likely to make good decisions, and this is not what we want in a leader.
According to Mormon critics such as Richard Packham, http://www.exmormon.org/tract2.htm and those summarized in Wikipedia, Mormons accept the following.
* God has a flesh-and-bone body and lives on a planet near the star Kolob.
* God was once a man and human beings are literally his children.
* Individuals like you and me can become like God and rule over our own worlds.
* Before living on this earth, we were spirits in “pre-existence,” during which we were tested. How we live in this life depends in part on our reward or punishment for our acts in the previous life.
* Jesus and Satan are brothers.
If a person who is not a Mormon becomes Mormon, the Holy Ghost takes out his blood and replaces it with Israelite blood.
These sound irrational to me.
There is nothing new here. We often use a person’s past membership in a group or past behavior as an indicator of how he would perform as a legislator. For example, we would hesitate to vote for someone who was a recruiter and local leader of the Klu Klux Klan or abandoned a woman trapped in an underwater car. This did not stop voters from West Virginia and Massachusetts from electing Senators Robert Byrd (D-WV) and Ted Kennedy (D-MA), but it probably did give them pause.
One objection here is that even if a candidate’s beliefs support our not voting for him, he might still be the lesser of two evils. This is correct. For example, we might still prefer a candidate who has irrational religious beliefs to one who voted for the Iraq war, for restricting free speech on political matters, for amnestying illegal aliens, and against tax cuts, because we are confident that his opponent will make worse decisions. This might occur, for example, if Romney ran against Hilary Clinton.
A second objection is that holding someone’s religion against him violates the separation of church and state. The separation between church and state is often misunderstood. It is a narrow thesis that holds that a person’s legal rights and duties should not depend on his religious beliefs or practices. This is a distinct from the issue of who govern our country. A person’s membership in a private group (for example, the Klu Klux Klan) should also not affect his legal rights and duties, but that is independent of whether we should hold a candidate’s membership against him when we enter the voting booth.
A third objection is that religion is a personal matter and as such it should not be considered. The distinction between personal and public behavior is unclear and in any case irrelevant. For example, it’s unclear whether participation in corrupt business practices is a personal matter, but nothing rests on this issue. What matters is whether this indicates how a person will govern.
A fourth objection is that Mormonism is no more irrational than other religions. For example, consider the following.
* The Father, Son, and Holy Ghost are truly distinct persons from one another and yet there are not three Gods but one.
* There are exactly nine orders of Angels.
* If a priest blesses bread and wine, then it becomes the body of Jesus. Actually does, not metaphorically.
It is not clear that these claims are as irrational as Mormon ones, although to be fair I haven’t turned on my irrationality-meter. However, if these beliefs or ones connected to them reliably lead candidates to reject evolution, deny parental rights to gays, or ignore data on sex education, then we should be less enthusiastic about candidates who accept them.
A fifth objection is that membership in religious organizations is not a reliable indicator of poor reasoning or judgment. The objector might claim that because there are almost no atheists in high office and because we can’t determine which people join religions merely for cultural reasons, religious membership doesn’t reliably indicate anything. Because there aren’t any studies on this topic that I’m aware of, this objection might be fatal. However, it is worth noting that we regularly make predictions based on commonsense connections. For example, we predict that former members of the NAACP will favor African-Americans no matter what. Similarly, we (leaving out West Virginia voters) judge former members of the Klan as likely to have too much animosity toward minorities to trust in office. When it comes to predicting how politicians will rule on things like abortion funding, stem-cell research, and euthanasia, I don’t see why we can’t rely on similar commonsense connections.
02 August 2007
Class Warfare
The Objectivist
THE RICH, FOXES, AND HENS
Dunkirk-Fredonia Observer
July 8, 2007
We are once again being treated to class-warfare politics. Presidential candidate John Edwards declares, "Our tax system has been rewritten by George Bush to favor the wealthy and shift the burden to working families. That is simply wrong." In 1992, Presidential candidate Bill Clinton claimed that it was time to make “the rich pay their fair share again.” Congressional Democrats constantly bemoan tax cuts for the rich. These demagogues keep trying to further the lie that the rich don’t pay their fair share.
A little background is in order. The government is engaged in an all-out war against your wallet. According to a Tax Foundation study, the average U.S. household in 2004 paid $26,738 in taxes. This consists of $17,338 to the federal government and $9,400 to state and local governments. Since average households (middle 20% of households by income) make between $42,305 and $65,000 this is an ungodly sum.
The reason you don’t remember paying that much is that the attack is dispersed and largely hidden. The voracious federal government imposes payroll taxes (Social Security and Medicare), income taxes, corporate taxes (Who do you think pays them?), gasoline taxes, airplane taxes, telephone taxes, alcohol taxes, etc. The greedy state and local governments impose taxes on many of the same things, plus some new and creative assaults such as property, utility, and insurance taxes.
The rich pay through the nose. In 2004, the top fifth of households paid on average $81,933 in federal, state, and local taxes. In contrast, the bottom 20% of households paid on average $4,325 in taxes.
As a side note, it doesn’t take much to get into the top fifth. Any household making more than $99,502 made it. In 2006, for example, 21 Fredonia State administrators and faculty made more than $100,000 by themselves and many have working spouses. I would be surprised if they considered themselves rich.
Despite paying a small fraction of what the “rich” paid, the lowest fifth of taxpayers made out like bandits. They were on average given $31,185 in government benefits above and beyond the taxes they paid. Another way to look at it is that they received $8.21 for every $1 paid in taxes. The lower middle class (second fifth) also did well. On average, they received $18,067 in government benefits above and beyond the taxes they paid. They got $2.51 for every $1 paid. Predictably, the top fifth took it in the shorts. They paid $48,449 in taxes compared to benefits received and only got 41 cents for every $1 paid.
Consider the different ways we could tax citizens. We could tax at a flat fee, a flat income-tax rate, or a progressive rate (where those making more money pay a higher percentage of their income). There is nothing fair or just about a flat rate, let alone a progressive one. We don’t think that McDonalds should charge more to richer customers. Instead we think that people should pay for what they receive. The same should be true for government goods and services. This conclusion becomes more obvious when we remember that the poor and lower middle class get more benefits. It’s as if a poor family ate three more hamburgers than a rich one and then angrily demanded that McDonalds charge them less.
A flat tax still allows for income redistribution, although this is unfortunate. It is arguably unjust to force the rich to work for the poor. Consider the Christmas Carol and whether you think that Bob Cratchit may force Scrooge to give money to Tiny Tim. Clearly not. Nor does this change if Cratchit’s neighbors get in on the act. The same is true even if the neighbors schedule a friendly neighborhood vote on the matter. It’s not their money. Forced redistribution of wealth is just the systematic taking of stuff from Scrooge and people like him. Democracy doesn’t justify such a taking any more than it would justify the outcome when two foxes and a hen vote on what’s for dinner.
It’s worth noting that the rich didn’t cause the state of the poor. Robert Rector of the Heritage Foundation points out that in the context of poor children, two major causes of poverty have little to do with the rich. Rector points out that poor households with children are on average supported by an average of 16 hours of work per week. In addition, nearly two-thirds of poor children reside in single parent homes. If people in the household worked a combined 40 hours a week or poor mothers married the fathers of their children almost 75% of currently poor children would no longer be poor.
One solution to ease the burden on the rich is to adopt a flat fee or, if this is not politically viable, a flat income-tax rate. Another solution is to cut overall welfare liabilities. One example of going in the wrong direction was the recently defeated Kennedy-McCain immigration bill. The bill attempted to amnesty 12 to 20 million illegal aliens. The costs of this bill were staggering. Robert Rector, continuing his yeoman work, estimates that each low-skilled immigrant household costs taxpayers $19,588 per year (benefits minus taxes) and $1.2 million total and well over half of illegal aliens are low skilled. 50-60% lack even a high school degree. That this bill was even considered should tell the rich all they need to know about who the President and Senate want to have for dinner.
THE RICH, FOXES, AND HENS
Dunkirk-Fredonia Observer
July 8, 2007
We are once again being treated to class-warfare politics. Presidential candidate John Edwards declares, "Our tax system has been rewritten by George Bush to favor the wealthy and shift the burden to working families. That is simply wrong." In 1992, Presidential candidate Bill Clinton claimed that it was time to make “the rich pay their fair share again.” Congressional Democrats constantly bemoan tax cuts for the rich. These demagogues keep trying to further the lie that the rich don’t pay their fair share.
A little background is in order. The government is engaged in an all-out war against your wallet. According to a Tax Foundation study, the average U.S. household in 2004 paid $26,738 in taxes. This consists of $17,338 to the federal government and $9,400 to state and local governments. Since average households (middle 20% of households by income) make between $42,305 and $65,000 this is an ungodly sum.
The reason you don’t remember paying that much is that the attack is dispersed and largely hidden. The voracious federal government imposes payroll taxes (Social Security and Medicare), income taxes, corporate taxes (Who do you think pays them?), gasoline taxes, airplane taxes, telephone taxes, alcohol taxes, etc. The greedy state and local governments impose taxes on many of the same things, plus some new and creative assaults such as property, utility, and insurance taxes.
The rich pay through the nose. In 2004, the top fifth of households paid on average $81,933 in federal, state, and local taxes. In contrast, the bottom 20% of households paid on average $4,325 in taxes.
As a side note, it doesn’t take much to get into the top fifth. Any household making more than $99,502 made it. In 2006, for example, 21 Fredonia State administrators and faculty made more than $100,000 by themselves and many have working spouses. I would be surprised if they considered themselves rich.
Despite paying a small fraction of what the “rich” paid, the lowest fifth of taxpayers made out like bandits. They were on average given $31,185 in government benefits above and beyond the taxes they paid. Another way to look at it is that they received $8.21 for every $1 paid in taxes. The lower middle class (second fifth) also did well. On average, they received $18,067 in government benefits above and beyond the taxes they paid. They got $2.51 for every $1 paid. Predictably, the top fifth took it in the shorts. They paid $48,449 in taxes compared to benefits received and only got 41 cents for every $1 paid.
Consider the different ways we could tax citizens. We could tax at a flat fee, a flat income-tax rate, or a progressive rate (where those making more money pay a higher percentage of their income). There is nothing fair or just about a flat rate, let alone a progressive one. We don’t think that McDonalds should charge more to richer customers. Instead we think that people should pay for what they receive. The same should be true for government goods and services. This conclusion becomes more obvious when we remember that the poor and lower middle class get more benefits. It’s as if a poor family ate three more hamburgers than a rich one and then angrily demanded that McDonalds charge them less.
A flat tax still allows for income redistribution, although this is unfortunate. It is arguably unjust to force the rich to work for the poor. Consider the Christmas Carol and whether you think that Bob Cratchit may force Scrooge to give money to Tiny Tim. Clearly not. Nor does this change if Cratchit’s neighbors get in on the act. The same is true even if the neighbors schedule a friendly neighborhood vote on the matter. It’s not their money. Forced redistribution of wealth is just the systematic taking of stuff from Scrooge and people like him. Democracy doesn’t justify such a taking any more than it would justify the outcome when two foxes and a hen vote on what’s for dinner.
It’s worth noting that the rich didn’t cause the state of the poor. Robert Rector of the Heritage Foundation points out that in the context of poor children, two major causes of poverty have little to do with the rich. Rector points out that poor households with children are on average supported by an average of 16 hours of work per week. In addition, nearly two-thirds of poor children reside in single parent homes. If people in the household worked a combined 40 hours a week or poor mothers married the fathers of their children almost 75% of currently poor children would no longer be poor.
One solution to ease the burden on the rich is to adopt a flat fee or, if this is not politically viable, a flat income-tax rate. Another solution is to cut overall welfare liabilities. One example of going in the wrong direction was the recently defeated Kennedy-McCain immigration bill. The bill attempted to amnesty 12 to 20 million illegal aliens. The costs of this bill were staggering. Robert Rector, continuing his yeoman work, estimates that each low-skilled immigrant household costs taxpayers $19,588 per year (benefits minus taxes) and $1.2 million total and well over half of illegal aliens are low skilled. 50-60% lack even a high school degree. That this bill was even considered should tell the rich all they need to know about who the President and Senate want to have for dinner.
Subscribe to:
Posts (Atom)
