Chapter 5 of George Will’s The Conservative Sensibility (2019) calls out the twisted logic of economists and pundits who advocate wholesale wealth redistribution and expansive Government. Their reasoning is increasingly and demonstrably flawed. Will leans on the sarcastic, humorously on-point wisdom of John Cochrane, who blogs at The Grumpy Economist, to make his point. Here is a killer article from 2014, which should embarrass Nobel laureates Joe Stiglitz and Paul Krugman:
That article tracks and explains nicely so much of what we study here weekly that I was surprised I had not seen it until the book we’re examining cited it. George Will (whom The Wall Street Journal called “the most powerful journalist in America”) publishes a book in 2019 quoting a 2014 Cochrane essay at length. Cochrane’s arguments have not been refuted for over 5 years. Here’s his 1-2-3 anti-wealth redistribution/anti-statist knockout punch.
First, the consumption gap between the rich and the middle class is far less dramatic than the wealth gap. “Rich people mostly give away or reinvest their wealth. It’s hard to see just how this is a problem”. Today, Marie Antoinette is not living in splendor saying let them eat cake while peasants starve and die in the streets. But Joseph Stiglitz argues that inequality is a problem because of “a well-documented lifestyle effect – people outside the top one percent increasingly live beyond their means”, what he calls a “trickle-down behaviorism”. Cochrane writes “Aha! Our vegetable picker in Fresno hears that the number of hedge fund managers in Greenwich with private jets has doubled. So, he goes out and buys a pickup truck he can’t afford.” It’s a dumb argument that wealth redistribution is needed to encourage thrift in the lower class.
Second, some economists argue the exact opposite. Rich people save too much and poor people do not save enough. Redistributing wealth from rich to poor stimulates consumption that avoids “secular stagnation” (see my last post). Cochrane writes “I see. Now the problem is too much saving, not too much consumption. We need to forcibly transfer wealth from the rich to the poor in order to overcome our deep problem of national thriftiness”.
Finally, the pattern of egalitarians deciding on the result they want – expansive Government that confiscates and redistributes wealth – and then coming up with a problem that justifies it, continues. How about money in politics? The root of evil inequality is that the wealthy buy political influence. The intellectual contortions and twists of logic are astounding. The argument is that campaign contributions unfairly determine electoral outcomes (a dubious empirical claim). So we must purify politics by prohibiting private money to avoid corruption. What they really mean is that they want government to confiscate and regulate private wealth so that individual wealth cannot influence politics in directions they don’t like.
“If the central problem is rent-seeking, abuse of power of the State to deliver economic goods to the wealthy and politically powerful, how in the world is more government the answer?” Redistribution isn’t an efficient, costless transfer to help the poor. Bloated, corrupt, inefficient Government must forcibly impose it. The problem is not that wealth is the primary determinant of political power but rather that political power is too often the primary determinant of wealth.
Next week, we conclude our romp through Chapter 5 of The Conservative Sensibility.