Roger Koppl at the Thinkmarkets blog explains the controversial issue of income inequality from the Austrian school perspective;
This indifference to income distribution is all the more mysterious because pro-market thinkers generally support a theory of politics that tells us to watch out for ways the state can be used to create unjust privileges for some at the expense of others. We should expect the distribution of income to be skewed toward the politically powerful and away from the poor and politically weak. In a representative democracy “special interests” engage in “rent seeking” to get special favors. Those special favors enrich some at the expense of others. That’s what they are meant to do!Liberal political theory tells us to expect that sort of thing as a sort of disease to which the body politic is subject under representative democracy. Our presumption, then, should be that much of the inequality of any epoch is produced by tariffs, licensing restrictions, bailouts, and other specific acts of governments. Most of the time the game is rigged more or less. (The trick of constitutional design is to minimize this evil bathwater without tossing out freedom or democracy.) The more a society’s income distribution is determined by politics and not markets, the more it will be skewed away from whatever pattern would emerge in a less fettered market economy. And in general, that skew will be toward greater inequality. As the political component grows, we can expect power to be concentrated in fewer and fewer hands and income distribution be more and more unequal. If political power is growing, we should strongly suspect that some of the rich are using the state to squeeze money from most of the poor.
Mr. Koppl identifies four ways governments create such inequality: Privatizing profits and socializing losses, Regulation, Collapse of the rule of law and Public Schools
Pls read the rest here
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I comment that it has been liberalism, whereby many live in clientelism and in dependency upon transfer payments presenting not only moral hazard but also ethical hazard as well.
Moral hazard is defined as the financial risk arising to a third party, that comes from an exchange between two contracting individuals. Ethics is defined as right relations with others that reflects virtues, that is beneficial speech and behavior. Ethical hazard is defined as the hazard to one’s virtues arising through predatory and libertine lifestyle of others.
Wikipedia provides an excellent definition of Clientelism as well as Transfer Payments.
Risk to financial moral functioning and ethical living comes by Francois Hollande’s proposal for European Socialism economic stimulation, as Mike Mish Shedlock writes Hollande announces 20 “confidence shock” measures to support home building Francois Hollande is a career politician; the very epitome of European Socialism, yes the poster adult of European Socialism. He is one disconnected, just like those who elected him, from economic reality, specifically that government debt, whether it be national treasury debt or municipal debt, is a minotaur of destruction. He ran on the platform of economic stimulus and won the election; unfortunately economic stimulus at this point will not help, as Mike Mish Shedlock describes that the economy of France is imploding.
Living in the inner city, and being low income, I testify that risk to one’s ethics comes by Social Security Disability payments to those who could work but choose a life of dependency who usually conduct themselves negatively in the lives of others by being being predatory manifesting in sociopathic and psychopathic behavior, or by being libertine and living in abandon. Such individuals often include returning veterans, those released from prison for violent crimes, and silly young women, who have gotten themselves pregnant by men who can’t hold, or do not hold jobs, that support a family; these women often go on TANF, and from there often find they cannot take the pressure of a full time time and go on to give up their children to adoption; I continually see these loose dogs, as Urban Dictionary puts it, roaming the downtown area.
Some are motivated by preeminence, others by confrontation, others by being busy bodies, others by being gossips, and other by being dependent upon dole even though they could work. A culture of sycophantic codependency surrounding Social Security Disability Payments has risen to facilitate these financial morally injurious and ethically harmful carnal dispositions. Today’s cultural toady’s include Social Security Disability Lawyers and Public Housing Authorities. Obtaining social security disability payments becomes a pivotal point in one’s life, where many became involved in a culture of dependency, with an ensuing psychopathic predatory lifestyle, or alcohol dependent lifestyle. A second generation and even third generation of LBJ’s grandchildren develop who fail to receive moral and virtue education at home, and go on to expect social support and even riot in the streets, such as the “wildings’ reported by Robert Wenzel in LBJ's great grandkids go wilding in Rahmaland.
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