October 28, 2003

The Idle Rich

Dan Drezner is Defending the idle rich?, and some interesting comments ensue. In response to someone who questions whether there is any value in allowing the idle rich to exist, I responded with an argument from my current reading list:

Hayek makes the case fairly strongly in "The Constitution of Liberty". He claims that the rich drive experiments in new ways of living, some of which will, through technological progress, trickle down to the masses. Most household appliances, modes of travel, luxury items, and other modern conveniences are examples. Without the early (rich) adopters, these would either have never been created, or would have been adopted much more slowly -- all to the (long-term) detriment of the rest of us. The quality of life improvements driven by aesthetics that Virginia Postrel is talking about in her new book would also probably qualify.

He makes similar cases for the need for rich "independents" (i.e. those who don't depend on employment for their living) to start risky ventures, support the arts, experiment philanthropically, etc.

He claims that the harms of the completely-idle rich (while an example of the kind of waste that often occurs in market systems) are outweighed by the benefits accrued from the few whose independence helps society.

As for why it's better to have them selected by birth rather than lottery. Both are random in the sense that neither would give the fortune to someone who is more deserving than those who don't have fortunes. But the former is more moral (in the classical liberal's eyes) because it respects the property rights of the parents. And, Hayek argues, it is more likely that someone born to a rich family will be raised, educated, and trained to be able use the wealth well. This last is a bit of a stretch, given the behavior of the "celebutants" but I wonder how much better the average lottery winner deals with their sudden fortune....

[Hayek] would claim that it would require the state to determine deserts -- who in all of society deserves the fortune. Hayek believes that this objective is fundamentally at odds with a society based on freedom (from coercion, that is). He claims that societies based on freedom can only distribute wealth based on value, not merit, because any attempt to distribute based on merit would involve the continuous intrusive and coercive involvement of the state, eventually leading to stagnation. Any attempt to measure merit perforce leads to arbitrariness rather than the general rule of law, with all of the attendant consequences. Any qualification system would privilege our current (or historic) ideas of merit and shut out any conceptions that might serve us better in the future when we are faced with new challenges, new technologies, new enemies, etc. The Chinese examination system and its focus on Confucian scripture would be an example of this last.

Read the rest, as they say.

Posted by richard at October 28, 2003 11:47 PM

We don't need Postrel and Hayek to tell us this - why don't we substitute the phrase "god-given wealth" and return to the middle ages when we peasants could count on our nobles (and the church) to employs us via their status-testifying conspicuous consumption and provide a social safety net with their handouts? oh wait, no we couldn't. cause nobody (ie, the state) made them, until monarchs (states) consolidated their power over their heads and began national social provisioning -- including such stagnating, arbitrary, intrusive, coercive policies as, you know, sewers.

of course that "trickle down" effect requires cheapening production so those masses can afford the products, which historically (ie, empirically as opposed to the bs postrel and hayek seem to think constitutes truth) threw people off farms and out of crafts and into abject urban povery without state-based redistribution. remember the french revolution, bismark? why did all that happen? how did western europe and its progeny manage to circumvent these "natural" and oh-so superior economic processes and institute the welfare state? the devil must have made them do it.

broad unsupported truisms, facile black-and-whitisms -- i wish i'd been a political scientist. we shouldn't (inheritance) tax the idle rich because if we did, they'd all ... stop working (they weren't already, remember)? stop consuming? come on. and of course, society (and even those rich who would now be subject to the arbitrary actions of govt -- boo hoo!) wouldn't get ANYTHING back in return, would they?

per hayek, i'll just make some unsupported counter-assertions: inheritance taxes keeps more of the money invested where it can be employed with a superior multiplier effect for the economy. it keeps it from being dissipated in the coke and ectasy market. it keeps the majority of the wealthy and their projeny working -- not just contributing to new wealth-generation, but in contact with their fellow citizens and the real world, which is good for democracy. and god forbid, that some of the proceeds from that wealth-generation (and you'd be hard pressed to find a successful american industry that hasn't been bolstered by the state so give me a break, they can give something back) be invested in programs that stabilize society and benefit everyone, ensuring for example, that the rich can enjoy properly educated staff and the protection of the oil supply for their SUVs.

of course but we can't have that, could we. because then we'd have a community! and who wouldn't place conservative principles over, you know, the needs of fellow citizens in the real world? hayek would have to think in terms of costs and benefits for all of society, instead of privileging his own theorectical musings. talk about your ivory tower academic.

Posted by: Julia Ott at October 30, 2003 11:30 AM

Some points in favor of the idle rich:

(1) They don't contribute to the economy. But for their consumption (which is, I admit, nonnegligible), you might regard them as the "conscientious objectors" of capitalism. Or at the very least, they're not ripping off people's 401(k)'s, sweatshopping the Third World, or stripmining the landscape. Sure, it's objectionable that a person's overall "worth" too often tends to be a function of his wealth. As a rule, we all object to that kind of worldview.

But another worldview worthy of serious reexamination is the one that values persons based on their contribution to the economy. You see this kind of talk everywhere, whether it's "from each according to their ability . . ." or "the best way to fight terrorism is to go to work everyday." It seems to me that economic model mobilizes against idleness. But really, I don't see a damned thing wrong with taking a life off, if you can get away with it.

We need to make clear that the idle rich are objectionable not because they're "idle," but because they're "rich."

(2) The idle rich tend to embarrass themselves in a way that wins support for the larger class war. They expose the fraud of Dubya-style "meritocracy," which would require that historically disadvantaged social groups get no preference in their competition for social goods . . . but if your father is an oil magnate, you get to go to Yale, and if he makes the Presidency, you'll be handed business-saving oil refining contracts with fawning Saudis.

The way I see it, people like Paris Hilton serve the greater good by providing an ongoing reminder that, despite the peddled ideology, those who thrive in a capitalist system are not necessarily the "most deserving." That's comforting for the lowly and disempowered, who are too often given the impression that it's their own fault.

Posted by: Brad A. at October 30, 2003 03:34 PM