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Archive for the ‘wealth’ Category

It should be recognized that most people are stupid about most things; myself included. However, there is a certain lack of self-critical thinking I want to pick on at this moment, and I am going to call this mode of thought the “Preference Fallacy.” I will define it as this: the dissonance that inheres in what people say they prefer to be the case, and what they signal and/or choose to be the case by their actions. I’m noting that this is not some broad form of hypocrisy, since it is not so much someone saying “People shouldn’t do this” and then they go do it, but rather they say something like “This should be the case,” yet they do nothing of themselves to achieve that. Note how I say that it is of themselves, a very specific distinction I make for political cases, where the Preference Fallacy crops up very often.

Consider this image, which I have seen several times and which certainly has been seen by others:

What is meant to be illustrated? First, there is the bare fact that wealth distribution is unequal. That’s a given, and anybody with a brain recognizes that attempts to “reduce inequality” will inevitably lead to wealth destruction. I’m not going to hammer on that point. The other thing meant to be illustrated is this quaint notion many individuals seem to hold that “distribution should be equaler.” Why? Well, just because, but I’m going to challenge exactly this stated preference, since it not only fails to reflect reality (not a shortcoming of any preference in itself) and is beside the point, but because people don’t actually behave like this is the ideal. In fact, attempts to behave in order to fulfill this stated preference clearly, by demonstrated preference, would cost people what they prefer more. As such, this “stated preference” essentially doesn’t matter.

Here is a thought experiment. Equalitarian Edward states that he would prefer for society to be more equal. He insists that he behaves in accordance with this preference whenever he can. However, as we observe his behavior in the market, we see that this stated preference informs his decisions not at all. Who does he choose to buy his car from? Subaru, thereby increasing the profit of the company and by extension to a larger degree its owners, as opposed to the employees. Why does he buy a Subaru? Because he prefers its comfort, reliability, and style. He chooses not to buy the beater from Poverty Pam, even though doing so would help decrease wealth inequality, since now his money is going not to those who are already wealthy but to someone who is poor.

Where does Edward buy his groceries? The bulk come from Cub Foods, because it is most convenient, they have a wide selection, and the prices are cheaper. Once again, he passes over Pam. Likewise for where he buys his coffee (Starbucks), his clothes (JCPenney’s and assorted boutiques), his books (Amazon), his internet (Charter), his cell phone (Apple) and service (Verizon), so on and so forth, virtually every purchase of his lines the pockets of the wealthier more than those who are less wealthy. What seems a better explanation of his behavior, that he has a preference for lessening wealth inequality or increasing it? Between only those two options, the latter seems clearly to be the case.

But but but, you will certainly say, there are other explanations! And I say that is certainly the case! I don’t actually think he has a preference for increasing wealth inequality so much as he simply prefers better quality and service in his purchases, and it just so happens that this has a high degree of correlation to increasing the wealth of the wealthier. It is not that he has a preference for increasing wealth inequality, only that he doesn’t really have a preference either way. If it so happens that buying from a person who is poorer gives him a better quality good, he will do so; but that the person was poor won’t affect his decision so much as the product itself. In the market, people choose products, not people.

So what are we to make of the “ideal” distribution of wealth shown in the above graph? Precisely nothing. The demonstrated preferences of people in the market happens to support more wealth inequality rather than less. (Caveat: I say that it supports the present distribution only because the American society happens to have capitalistic elements. More accurately, the USA has a distributed socialist-corporatist economy with capitalistic elements peppered here and there. I’m not pretending a full-fledged capitalism won’t have “huge” wealth inequality, though I do believe the “true measures of wealth” would in fact be more equal. For an elaboration on my views here, read my paper.)

I understand that some who remain sold on the intrinsic good of “equaler wealth distribution” would like to point to other problems, say that while a company like Subaru might choose to disproportionately give its profit to the owners and elite controllers of the company, it shouldn’t. It just so happens that people don’t have a lot of say about how the companies they buy from are structured. To this, I would point out that this just pushes the Preference Fallacy back another step. Sure, one might state they have a preference for “more equally distributed profits” within a company, but once again, the business models that happen to correlate most with the products they prefer for itself are these companies where the CEO’s pay is many hundreds time that of the average worker within that company. I think distributists are especially prone to this way of thinking, and all my ire to them where that is concerned.

So I’ve chosen in particular the issue of economic inequality for my focus of the fallacy, but it certainly occurs throughout just about everything people say they prefer. Women say they prefer Nice Guys, but they run off with Bad Boys. People say they prefer the minimum wage higher, but they still shop around for cheaper prices and don’t tip those people who do work minimum wage (honestly, have you ever seen someone tip the cashier at McDonald’s?). They want men and women to have equal pay, yet (like the issue of business models) they consistently support those models in which women are paid less. (I’m not going to explain this one: here’s a video which deals with it in short order.)

There are so many things people say they prefer to be the case, but they won’t help to establish that for themselves. Sure, they might be a political activist, but note that the introduction of the power of the state to cure problems doesn’t count as exercising one’s own preferences but penalizing and prohibiting the preferences of others.

Don’t look to what people say, look at what they do. There is nearly always some degree of bullshit in what people say they prefer. This bullshit is the Preference Fallacy.

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I’ve always been enamored by Jesus’ parable of the talents that he recounts in Matthew 25:14-30. It has a lot to do with my feeling of obligation to take my intellectual gifts and employ it for the Church. But let’s not focus on the spiritual interpretation just now.

There seems to be a clear implication by Christ’s willingness to allow it to be the case that the master gives to the economically successful servants more capital control. That is, the implication seems to be that a greater control of capital by individuals is perfectly okay. There is nothing inherently unjust in one person being allowed to control 10 times as much capital in the economy as another; and this because they proved themselves successful in the handling of that much capital previously. On the other hand, those who are given some capital that they can use to make more in the economy, who do not use it (at least even to put it in the bank to collect interest) deserve to lose it.

Of course, there is also the interesting note about it being acceptable to Christ that money can be put to work collecting interest, by loaning it out to others (why did usury take so long to be clearly defined by the Scholastics? is one of my continual wonders). Even beyond that, we can also note how it is also acceptable for a person to have a view towards taking their money and investing it with the purpose of making more money for themselves.

So there is nothing inherently wrong, to Jesus at least, that there should be unequal distributions of capital control and wealth in the economy.

I do not think we can take this and say “This proves that Jesus was a capitalist.” I’m highly skeptical of taking Jesus’ words and coming up with some economic or political system based on it. But the right to property implied in this parable does indicate that Jesus approves of freedom in the market, at the very least.

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