Politics & Economy in the US

If you look at a situation and decide that it is unfair because one person has too much and another has too little, you probably are making a judgment that compares goals. The judgment says that the person with too much is satisfying goals that are less worthy than those of the person with too little. We commonly make this sort of normative judgment; our decision to give money to one charity rather than another indicates that we find some goals more deserving than others. Our decision to give at all suggests that we decide that the goals of someone else are more worthy than our own "selfish" goals.

Economic analysis suggests that people earn different amounts of income both because they have different goals and different abilities (or resource endowments, to use a more comprehensive but also more abstract term). From this starting point, we can examine a few common judgments on fairness

Can wealth redistribution take place in the US? The least disruptive approach would be changing the tax code to be more progressive. This could be modifications to the income tax, the restructuring (not elimination) of the estate tax, and imposition of either wealth taxes or consumption taxes. The wealthy can be expected to object to all of these changes. In addition they have the political and economic clout to promote their self interests. A concerted effort by the people can succeed. Recent examples in countries like the Phillipines and Poland show the power the people can have when they join peacefully for a change in the organization of society.

Only the rich can create economic growth In the US this is contradicted by the history of our country. All the great industries of the 19th and 20th Centuries were created by individuals with no prior wealth. Andrew Carnegie, Henry Ford, Bill Gates, etc. started with essentially nothing and built huge enterprises. On the other hand the children of these entrepreneurs have not been especially noted for doing anything notable. Andrew Carnegie felt so strongly that each generation should make its own way that he left the bulk of his estate to charity. His children had to make their own way. The secret of a successful entrepreneur is his ability to raise capital to expand his enterprise. This is obtained from banks and selling stock and not generally from personal wealth. One doesn't need rich people to build a business. The capital of a bank can be $1000 from one hundred people or $100,000 from one person. The amount available to lend is the same. Wealth does not have to be concentrated to be available for investment. In the developed world much of the available capital comes from pension funds and is thus not provided by the wealthy.

The only areas which continue the patronage model and are still the domain of the wealthy are opera, classical music and big fine art museum

The fairness argument: As all people come into the world equally helpless they should ultimately reach at least approximate equality of condition when they mature. People have an innate sense of what is fair as many psychological experiments have demonstrated. The intrinsic sense of fairness requires basic economic equality.

Large-scale firms contributed to rising productivity but created potentially dangerous concentrations of economic and political power. Evolution of banking and financial institutions both aided growth and added a source of potential instability to the economic system.

With the coming of the New Deal in the early 1930s, however, it became impossible to maintain the sacrosanct character of private property. A series of decisions by the Supreme Court validating New Deal legislation removed the constitutional barrier to governmental action in the economic field.

e series of economic measures of the New Deal, including control of agricultural prices, production, and marketing; the sanctioning and support of collective bargaining; social security legislation; the increase in the progressivity of income taxes; regulation of the security exchanges; increased governmental control over money and banking; the conscious use of deficit financing; the great increase in the proportion of national income flowing through the governmental budget; and the great increase in the proportion of the labor force in governmental employment, meant a significant change in the capitalistic system. The later legislative acceptance, which came about after World War ii, of the responsibility of the federal government to attempt to maintain full employment represented another step in the same direction. All these changes served to differentiate modified capitalism from old-style capitalism. [SeeWelfare state.]

"Capitalism." International Encyclopedia of the Social Sciences. 1968. Encyclopedia.com. 11 Jan. 2013 <http://www.encyclopedia.com>.

Instead, a capitalist society supplies new gadgets, appliances, and luxuries that arouse envy in those who cannot afford them and that inspire a ceaseless obsession with securing more among those who already own too much.

He argues that low taxes are harmful to the poor because they give government inadequate revenue to provide essential services to the poor. Higher taxes really would not harm the well-to-do, he says, because money and material possessions are subject to diminishing marginal utility. If such claims have a familiar ring, it is because Galbraith made the same points fifty years ago

. “Is it really your money?” Singer asks, citing economist Herbert Simon’s estimate that a flat income tax of 90 percent would be reasonable because individuals derive most of their income from the “social capital” provided by technology and by protections such as patents and copyrights, and by the physical security afforded by police, courts, and armies rather than from anything they personally do. If the “fruits of capitalism” are merely a gift of government, it is an argument that proves too much. By the same logic, individuals might be enslaved if they were not protected by government, so conscription (servitude for a brief period) would be entirely unobjectionable, as would the seizure of privately owned land to turn it over to new owners if their uses would yield higher tax revenues—exactly the basis of a 2005 Supreme Court ruling on “eminent domain.”

In fact, giant corporations are fully consistent with capitalism, which does not imply any particular configuration of firms in terms of size or legal form. They attract capital from thousands (sometimes millions) of investors who are strangers to each other and who entrust their savings to the managerial expertise of others in exchange for a share of the resulting profit

Today, the United States, once the citadel of capitalism, is a “mixed economy” in which government bestows favors and imposes restrictions with no clear or consistent principles in mind. As the formerly communist countries of Eastern Europe struggle to embrace free-market ideas and institutions, they can learn from the American (and British) experience about not only the benefits that flowed from economic individualism, but also the burden of regulations that became impossible to repeal and trade barriers that were hard to dismantle. If the history of capitalism proves one thing, it is that the process of competition does not stop at national borders. As long as individuals anywhere perceive a potential for profits, they will amass the capital, produce the product, and circumvent the cultural and political barriers that interfere with their objectives.

The concept of marginal utility was augmented in the 20th century by the method of analysis known as indifference analysis (see indifference curve).

marginal utility, in economics, the additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service. The concept implies that the utility or benefit to a consumer of an additional unit of a product is inversely related to the number of units of that product he already owns.

marginal utility. (2013). In Encyclopædia Britannica. Retrieved from http://www.britannica.com/EBchecked/topic/364750/marginal-utility