Economics is a branch of politics, which is a branch of ethics, and it is the study of property or ownership. This essay is a summary of my economic philosophy.
I
In a mostly wise nation – a nation in which mostly wise people have the power – everyone would want to be productive in order to contribute to the human pursuit of life extension and education (in the Philosophy of Life) and happiness. Life, wisdom, and happiness are interdependent: you can’t have one without the other.
But people would also want to accumulate personal wealth, because everything that everyone does is ultimately for one’s own happiness (whether in heaven or on earth). It isn’t enough that society is productive. The fruits of society’s productivity should be enjoyed by the individual. So wise individuals would seek to not contribute to making the pie, but eating a slice of the pie. Not only would people wish to produce; they would also wish to consume. Fair enough.
So there are two economic goals that everyone should have in mind: the wealth of society as a whole, and one’s own wealth. Ultimately, people only care about their own wealth (whether in heaven or on earth). But your own wealth depends in part on the wealth of society as a whole, because we largely depend on the productivity of others for our own wealth.
Almost everything that we own – if we are not irrational – has largely been created by other people. So we want “other people” to be as productive as possible, and – if we are not irrational – we also want to contribute to the effort to produce wealth, so that we contribute to the human pursuit of life, wisdom, and happiness. Even if we were not to directly benefit from the fruits of our own labor, why should other people give you a slice of the pie if you do nothing to contribute to making the pie? People are naturally selfish, so they have no interest in giving you a slice of the pie if you do nothing to earn it.
How should we go about distributing the wealth? Obviously, if you do nothing to enhance the happiness, or work on a project that would eventually enhance the happiness, of other people, then other people have no incentive to give you a slice of the pie. In other words, productive people – which is what wise people are – have no incentive to give a share of their wealth to non-productive people.
Of course, if you are struck down by illness, and are not responsible for your lack of productivity, then you may still be given wealth. Indeed, it may be a part of someone’s contract that he is to give you wealth during this time. But it would be because of your past – or future – productivity that people would give you wealth. Whether it is because of past, present, or future productivity, wise and productive people have no incentive to give you any wealth unless you are productive.
There are two kinds of people in the world: productive people and unproductive people. Productive people would wish to band together to form a cohesive nation, by which they defend themselves against any attempts by unproductive people to steal from them. But what would qualify someone as “productive,” and therefore deserving of some of the wealth? And how should we determine how much wealth people get for the productive work that they do?
II
Whether they are rich or poor, wise people are as productive as possible. It doesn’t matter how we distribute the wealth: wise people would be as productive as possible, so that they live as long and as enlightened and as happy a life as possible. So why not distribute the wealth equally? The reason that wealth should not be distributed equally is that individuals within productive society would want to realize their full potential. Indeed, it would be the desire to realize their full potential that they would band together and form a nation to protect them from outsiders in the first place.
So that individuals realize their full potential, they would not only wish to protect themselves from those who are outside of the productive nation who would wish to steal from them; they would wish to protect themselves from domestic thieves as well. But why wouldn’t wise people also want to steal from each other? The reason that wise people would not steal from each other is that such thievery would likely be mutually destructive. People would not allow others to steal from them. Attempts to steal would stir up conflict, and both sides would likely end up losing wealth rather than gaining wealth. Thievery would result in unnecessary destruction for all parties involved. Therefore, it would be considered an immoral and illegal activity.
It is human nature for people to have ownership over the fruits of their labor. Though more productive people would more likely be targeted for theft, they would also be better equipped to defend themselves. This can be stated mathematically as AW=1, in which A is your ability to steal from someone, and W is your willingness to steal from someone. A poor man has a higher willingness to steal from a rich man, because a dollar would mean more to a poor man than it would mean to a rich man. But the poor man would also find it more difficult to steal from the rich man because the rich man would be better equipped to defend himself because he could use his greater wealth to pay for weapons and soldiers and tools of self-defense. Similarly, though a rich man would be better able to steal from a poor man, he would be that much less willing to do so.
The name that I give to the mathematical equation above is the Crux of Capitalism, because it is the basis for a society that is free is theft. It gives you insight into a law of nature by which it would ultimately be futile for people to try to steal from others.
III
Now let’s look at reality. Today you likely live in a country that is governed by a dictatorship of some kind. There are basically two kinds of dictatorship: monarchy and democracy. In a monarchy, the ruler is one person, or one family, or one small group. In a democracy, the ruler is the majority of citizens. Under a monarchy, the minority can steal from the majority. In a democracy, the majority can steal from the minority. What is wrong with a ruler stealing from those over whom they rule?
The answer is that, if people are moral, they would fight back against such thievery, and overthrow such dictatorships in favor of a society in which there is a contract or “constitution” between the government and the people that prohibits theft of any kind. This kind of society would be one in which everyone pays a flat percentage tax depending on how much wealth they own. The only place for democracy would be in deciding how to run a government that is constitutionally obligated to levy a flat tax, and to prohibit thievery (euphemistically referred to as the “redistribution of wealth”).
To prevent dictatorial takeovers, people would be given a generous freedom to bear arms. This freedom would be limited to those arms that are most likely to be most conducive to the preservation of liberty, as determined by the democratic majority, and people would actively use this freedom. Such a society – in which the democratic majority is bound by the rule of law, as expressed in the constitution – is not a “democracy,” but a “republic.”
What if we live in a society whose people do not care to live under a republic, and whose people do not value liberty? Then we have a problem. Obviously, people do not know the Philosophy of Life if such thievery is allowed to take place. Indeed, it is because America’s Founding Fathers did not know the Philosophy of Life that they did not do a better job writing the United States Constitution. The US Constitution is a good try, but it is far from ideal.
Is it not possible for a wise person to take advantage of the failure of the rule of law to “loot” individuals and businesses, as when people vote for politicians who authorize government-sponsored thievery? Why shouldn’t someone who is born into a monarchy, or who votes under a democracy, take that opportunity to directly or indirectly steal from others who are not doing what they can to defend themselves?
IV
When wealth is taken from the rich and given to the non-rich, it goes towards rewarding people for their failure, and punishing people for their success. In other words, it provides people with an incentive to do nothing (productive), and it provides people with a disincentive to do something (productive). When dealing with fools, this is problematic, because fools are not necessarily productive. Wise people are productive regardless of how wealthy they are, but fools do not have the same incentive to be productive. Thus, this incentive scheme is particularly destructive in a foolish world, which is the only kind of world that would tolerate anything less than a republic of liberty.
In a totally wise world, the incentive argument doesn’t work because the non-rich would invest their wealth just as much as the rich, and the welfare recipients would still be as productive as possible. Thus, there would be no risk that an increase in taxes would harm the economy, because businesses would not be robbed of capital, and there would be no welfare recidivism. But in a totally wise world, it would be impossible for people to “redistribute the wealth” because the wise would not stand for it. It is only in a world of fools in which such redistribution is possible, and it is in a world of fools in which the law of incentives applies.
Insofar as the world of foolish, the law of incentives applies. If the foolishness of society is F, and if the law of incentives is L, then F=L. The greater the foolishness of society, the greater the law of incentives apply: the law that the redistribution of wealth rewards failure and punishes success, thereby harming the economy proportional to the extent of the redistribution, such that if the extent of the harm done to the economy is H, and if the extent of the thievery is T, then H=T. All three of these equations inform us of the Crux of Capitalism: AW=1, F=L, and H=T. But is the economic harm done by the redistribution of wealth greater than the benefit? Yes. That is implicit in the equation.
In conclusion, whether you directly or indirectly victimized by government-sponsored thievery, no wise man or woman would support it. Rather, wise men and women are republicans who demand a republic of liberty. As for what exactly the government and the market (politics and economics) would look like in a wise world, that’s another essay. But I’ll tell you right now that to become a citizen of the Nation of Life, you would have to pass a civility test, demonstrating your knowledge of the Philosophy of Life. This would be a matter of collective property that the nation of wisdom would make law. Indeed, vice in general would be illegal, insofar as the republic is willing to pay for it.