Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Posting-Version: version B 2.10.3 4.3bsd-beta 6/6/85; site ucbvax.ARPA Path: utzoo!watmath!clyde!burl!ulysses!ucbvax!mcgeer From: mcgeer@ucbvax.ARPA (Rick McGeer) Newsgroups: net.politics.theory Subject: Re: Redistribution of income and wealth Message-ID: <10415@ucbvax.ARPA> Date: Tue, 17-Sep-85 23:22:48 EDT Article-I.D.: ucbvax.10415 Posted: Tue Sep 17 23:22:48 1985 Date-Received: Thu, 19-Sep-85 05:16:13 EDT References: <186@gargoyle.UUCP> Reply-To: mcgeer@ucbvax.UUCP (Rick McGeer) Organization: University of California at Berkeley Lines: 73 In article <186@gargoyle.UUCP> carnes@gargoyle.UUCP (Richard Carnes) writes: >Obligatory stack of nested quotes: > >In article <10365@ucbvax.ARPA> mcgeer@ucbvax.UUCP (Rick McGeer) writes: >>In article <746@cybvax0.UUCP> mrh@cybvax0.UUCP (Mike Huybensz) writes: >>> >>>Any basic economics text can explain (via diminishing marginal return) >>>the benefit of redistribution of income. Clearly redistributing income is >>>not a zero-sum game with respect to social benefits. >> >>Well, now, my basic economics texts must have missed this. The only effect >>of income redistribution that I remember was an (alleged) countercyclical >>effect, which is not by any means undisputed. > >The following is from A. C. Pigou, *The Economics of Welfare*, 4th ed. >(London: Macmillan, 1948; originally published 1932), p. 89. > > It is evident that any transference of income from a > relatively rich man to a relatively poor man of similar > temperament, since it enables more intense wants to be > satisfied at the expense of less intense wants, must > increase the aggregate sum of satisfactions. Pigou wasn't exactly what I had in mind. It's not one of the basic texts, and I think many or most economists would disagree with this statement. The "aggregate sum of satisfactions" is thought to be a pretty meaningless phrase since satisfaction, or utility, is thought of as a cardinal rather than an ordinal quantity. The relative intensity of wants of one individual can always be measured, but I think that almost all economists would agree that determining the intensity of A's wants vs B's is a very chancy game. We can debate debate whether the determination can be made, if you like, but the point here is that if there is a consensus among economists in the matter, it is on the negative. Uh, strike that. Economists will agree that there is such a thing as the "aggregate sum of satisfactions": Alchian and Allen claim it is that quantity which is maximized by the free exchange of commodities in an open market. When Huybensz wrote his piece, I confess that I thought he was referring to some measurable quantity such as gnp. > >This is just common sense. If my rich uncle Jim gave me $10,000 he >would hardly notice it was missing; that's about what he blows on a >good weekend. But boy would I notice it. Now if I could only get >Jim to understand this. And don't tell me you can't have an >aggregate sum of satisfactions unless you wish to concede that >economic growth as measured by increase in GNP is a mere meaningless >number. Surpisingly enough, I'm not terribly enamored of gnp growth (or the rise and fall of the Dow, or the S & P index) as anything other than a rough approximation to the overall health of the economy. The index of leading indicators is a little more precise...but this begs the question. I don't understand what the "aggregate sum of satisfactions" is. I don't know of any evidence which shows that any transaction increases or decreases such a thing (any transaction which is voluntary axiomatically increases it, but who knows by how much...what are the units?), and I don't understand the relationship of such a thing to any measurable quantity. Unless and until I do understand these things, or you can explain them to me, I'm really not interested. And in both physics and economics, arguments "by common sense" should be regarded as guilty until proven innocent. After all "by common sense" if the cost of a factor in the production of a commodity A goes up, then the price of A must go up. (Hint: wrong). > >This is one reason why I am opposed to state lotteries: they >redistribute wealth in the wrong direction, besides preying on the >poor. If you're opposed to state lotteries for this reason. then you should be opposed to a variety of Federal and state programs which do precisely that: among them Social Security and public post-secondary education. -- Rick.