Wednesday, March 31, 2010


All of the current fashion regarding "spreading the wealth," "redistribution," and the notably gaseous "economic justice" overlooks one unavoidable truth: Human progress involves risks. The economic corrollary to this is that people who take risks that produce benfits to others should be compensated for doing so. This latter concept is not merely a principle of fundamental fairness, it is a pragmatic necessity as well. Why would anyone take fruitless risks, risks for which the rewards are subject to confiscation in the name of political ideology?

These facts give rise to two distinct types of wealth: that which requires someone to run risks to create, and that which does not. A redistributist may have an argument that it is not legitimate for a person to simply harvest resources that should be available to everyone, and amass a great fortune as a result. Compensating others, or the community in general for supplying the infrastructure, etc. to make such wealth possible seems reasonable. However, when a drug company risks millions to develop a drug which might never reach the market , or a venture capitalist supports the developer of some obscure technology that might benefit a great many people, or might lead to loss of the investment, those risk-takers should be entitled to retain the bounty of their risks. We seem to have realized this concept previously; we tax capital gains at a lower rate, and we allow patent protection to inventors. Conversely, we prescribe criminal sanctions for insider traders, who seek to capitalize on low risk transactions at the expense of innocent investors.

"Spreading the wealth" of someone who comes by such wealth as a result of political connections, exploitation of public resources or disproportionate depletion of common resources is far different than confiscating the legitimate gains of someone who through diligence and foresight profited where he might also have come away with nothing at all.

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