The boost in happiness that you get from having a billion dollars rather than $50k is not 19999x bigger than the boost you get from having $100k rather than having $50k.
That's one perspective. Another perspective is that letting luck play a role is a more cost efficient way to get people to take big risks. Maybe people wouldn't do some things (like move to Silicon Valley to re-imagine the way we do blah blah blah) without the chance of a big payday.
And taxing the big payday at extremely high rates would mute the motivation to play for the jackpot. Would as many people play slots if winnings were taxed at 90%?
Another perspective is that letting luck play a role is a more cost efficient way to get people to take big risks. Maybe people wouldn't do some things (like move to Silicon Valley to re-imagine the way we do blah blah blah) without the chance of a big payday.
Diminishing returns on money are supported by happiness surveys and common sense. There is no reason to assume, as you seem to, that risky things are automatically better for society than non-risky things. IMO common sense suggests the opposite.
Also, risk is fungible. If you want people to do a thing that has a 0.1% chance of earning $1m, you can find a thousand people and just pay them $1k each. If you have $1k and want to turn it into a 0.1% of $1m, you can play roulette a few times (not completely free, but the house take is pretty low).
Would as many people play slots if winnings were taxed at 90%?
Probably, yes. My country's lottery is taxed at 50%. Gamblers are not generally rational.
That's so far the best counterargument of this thread.
This is why I'm not a fundamentalist. Human economic systems are unbelievably complex, full of feedback loops and paradoxes. Anyone who thinks they can take a system like that and reduce it to some set of laws culminating in a series of absolute fundamentalist diktats that will always work is delusional.
It's even possible that the system is dynamic at the meta level -- that a series of economic rules or practices might work for a while and then stop working since the system has adapted to them.
What I don't accept is the naturalistic argument that since understanding economics is hard we should just throw up our hands and take whatever nature gives us. In the realm of medicine that gives us short lives and death from communicable disease. In the realm of economics it seems to give us any number of pathological degenerate states that are undesirable to anyone except some randomly selected group of casino winners.
I've toyed around with the idea that the nature of the economy might need to oscillate between winner-take-all and redistribution. During the 70s, we arguably had a supply-constrained economy with insufficient funds available at the top to fund expansion. We had an oversupply of fundamental innovation and an under-supply of entrepreneurship, etc. Now we seem to have a demand-constrained economy with an excess of wealth at the top chasing a diminishing number of opportunities and an undersupply of fundamental innovation-- the total inverse of the 70s. This looks more like the 20s, or the "long depression" of the late 1800s. Keynes and other left-ish economic thinkers were wrong in the 70s-- their policies just created stagflation. Maybe they're right now. Maybe they'll be wrong again in 30 years.
Economies are dynamical evolving systems, not static physical systems.
Comments
That's one perspective. Another perspective is that letting luck play a role is a more cost efficient way to get people to take big risks. Maybe people wouldn't do some things (like move to Silicon Valley to re-imagine the way we do blah blah blah) without the chance of a big payday.
And taxing the big payday at extremely high rates would mute the motivation to play for the jackpot. Would as many people play slots if winnings were taxed at 90%?
Diminishing returns on money are supported by happiness surveys and common sense. There is no reason to assume, as you seem to, that risky things are automatically better for society than non-risky things. IMO common sense suggests the opposite.
Also, risk is fungible. If you want people to do a thing that has a 0.1% chance of earning $1m, you can find a thousand people and just pay them $1k each. If you have $1k and want to turn it into a 0.1% of $1m, you can play roulette a few times (not completely free, but the house take is pretty low).
Probably, yes. My country's lottery is taxed at 50%. Gamblers are not generally rational.
That's so far the best counterargument of this thread.
This is why I'm not a fundamentalist. Human economic systems are unbelievably complex, full of feedback loops and paradoxes. Anyone who thinks they can take a system like that and reduce it to some set of laws culminating in a series of absolute fundamentalist diktats that will always work is delusional.
It's even possible that the system is dynamic at the meta level -- that a series of economic rules or practices might work for a while and then stop working since the system has adapted to them.
What I don't accept is the naturalistic argument that since understanding economics is hard we should just throw up our hands and take whatever nature gives us. In the realm of medicine that gives us short lives and death from communicable disease. In the realm of economics it seems to give us any number of pathological degenerate states that are undesirable to anyone except some randomly selected group of casino winners.
I've toyed around with the idea that the nature of the economy might need to oscillate between winner-take-all and redistribution. During the 70s, we arguably had a supply-constrained economy with insufficient funds available at the top to fund expansion. We had an oversupply of fundamental innovation and an under-supply of entrepreneurship, etc. Now we seem to have a demand-constrained economy with an excess of wealth at the top chasing a diminishing number of opportunities and an undersupply of fundamental innovation-- the total inverse of the 70s. This looks more like the 20s, or the "long depression" of the late 1800s. Keynes and other left-ish economic thinkers were wrong in the 70s-- their policies just created stagflation. Maybe they're right now. Maybe they'll be wrong again in 30 years.
Economies are dynamical evolving systems, not static physical systems.