h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

I have just read this entire thread, and am somewhat disappointed by the amount of ignorance shown in it.

Despite claiming to be about libertarianism, it hardly gets a mention, and when it does it is not used in any constructive form.

Put in it's most simple form, most libertarians believe that you or I know our situations better than someone working hundreds of miles away and many years ago, and think that generally we are better at spending our money than governments are.

this is a position which is largely supported by the evidence, and argues for small government doing as little as it needs to do.

Similarly capitalism is bandied about in the thread, but seems only interested in the very extreme variants.

The key principle in capitalism which doesn't seem to have come up much in this thread is that when people do a lot of work, they justifiably think that they should be allowed to keep most of the rewards for it.

This is best exemplified by the two extreme ends of the scale, who actually create the wealth.

At one end of the scale you have hundreds of thousands of small businesses who employ 5 people or less and create something like a quarter of all the wealth.

Traditionally, there has been a problem of arbitrary barriers to entering this category, usually based upon poorly phrased government legislation, often based around the idea of various forms of "social security" which aimed at poverty relief, but in actual fact produced institutionalised poverty because of various poverty traps.

At the other end of the scale you have a few thousand millionaires, and apart from a few special cases these tend to be polymaths with a voracious hunger for learning. These people do usially invest in all sorts of things which provide thousands (or hundreds of thousands) of jobs.

There seems to be an ill informed opinion in this thread that if you steal the wealth away from the rich, and give it to millions of poorer people, it will somehow invigorate the economy. In practice, it doesn't.

There is also an opinion which is quite vocal in this thread that tax avoidance is fundamentally sinful in some way. it isn't, it is just choosing which of the taxes you wish to pay to minimise your tax bill.

Tax evasion is also seen as sinful (especially as regard moving offshore if the tax is extortionate), but it isn't always so either.

back in the late sixties and early seventies, the then labour government decided to go in for a policy of punative taxation of the rich, for the purpose of frittering it away on th poor so they would get re-elected.

The main affect it had was to make those who had the option leave the country, thus reducing the size of the cake which the tax was taken out of, and dropping the overall revenue that the tax man actually received.

When the top rate was capped at somewhere around 60%, most of them started to return.

What matters in a capitalist society is that there are no artificial limits to social mobility, especially as regards wealth creation, and that there are good regulations in place to cope with the parts where "pure" capitalism doesn't work very well.

It doesn't matter too much if a country is low tax, or high tax (within reason), what matters is that the whole system (including tax) is relatively predictable, so you can make sensible long term predictions upon which to base your investment decisions.

"What matters in a capitalist society is that there are no artificial limits to social mobility, especially as regards wealth creation, and that there are good regulations in place to cope with the parts where "pure" capitalism doesn't work very well."

Presumably this would require at least some measure of equality of opportunity, and presumably more than exists in the UK at the moment. The problem with most libertarian theories that I've come across so far (and I'm thinking of Robert Nozick in particular) don't provide this because they can't guarantee a minimum standard of living or of education. Perhaps there are libertarian theories that can do this, but I've yet to come across them...

Motivating the talented is something that is important in every society, but it's important to remember that those who become very rich usually do so because of their talent - not because of "hard work". Although it may be true that the richest have "worked hard" it seems to me unlikely that they would have worked proportionally harder than someone who has less money. If the rich do deserve a greater share of the resources, then it can't be based on something other than claims about 'hard work' alone.

Otto

It doesn't so much require equality of opportunity so much as an absence of glass ceilings, where you are artificially limited fom rising past a certain point.

The classic example of this has to be the benefit traps (some of which labour has removed) in the uk benefit system.

I have been long term sick for over ten years, and during all that time I have not been allowed to earn more than twenty pounds in any one week, or to move out of my parents home (because I would be making myself voluntarily homeless and thus inelligable for housing benefit).

Due to recent changes in the system, I am now allowed to earn that twenty pounds for as long as I like, and when I regularly earn more than that, I can change over to working tax credit, allowing me to have no artificial limit put on my earnings.

Also, purely by chance I happen to know a few people who have more than 250,000 in the bank, and universaly they work longer than 16 hours every day (including sundays). They are also highly innovative, often using this innovation plus some of their money to create more wealth (not just for them, but for others as well).

Another thing they have in common is a tendency developed over a long period of time to be careful about spending money. While they might spend money on the same sort of stuff we do (or even more expensive stuff), they will have thought about if they actually need to buy the item. You tend not to find the cupboard full of toys which their children (or they themselves) have never played with, unlike with a lot of the people who have large credit card balances.

While it might be true that some of the super rich have got their wealth by being overpaid for being talented (beckham and some manufactured bands spring to mind), most of the rich have actually worked very hard for a long time to become an overnight sucess. With authors and musicians, you often find that they have been active in the business for a couple of decades before they get their big break, which usually came as a consequence of a lucky chance at one of their regular jobs. The same applies with actors.

These super rich stars do become rich because of talent, but also due to hard work, and often a lot of luck.

Self made millionaires on the other hand tend to see opportunities, and then take a risk with their own money, and a lot of time and effort growing the income from it into a good wage. While a few of them do sell their companies for a lot of money, and thus become rich rapidly due to no small amount of luck, most seem to take a wage from the business, build a cash reserve, and gradually grow it into a large amount of money over a number of years (sometimes a number of decades), and they don't tend to fritter money away much either.

Libertarian ideals are not incompatable with redistributive taxes, only with the idea of large tax levels with persistantly changing rules.

Stability is the key, so it is possible to make long term guesses so you can work out if something will make a profit three years from now, or if you are better leaving the money in the bank.

Even with as little as 3,000 in the bank, you can get a regular monthly bonus from the interest (about 11 pound if I remember correctly) and by the time you have something like 100,000 in the bank the income from the money alone is something like 100 pounds a week.

The rich don't deserve a greater share of resources, they typically leverage smaller amounts of resources into larger amounts. If you set the top tax rate at 60 percent, they still pay more tax, but they don't get the disincentive to putting the work in to generate the extra wealth.

Famously, at one point elvis presley was in the 98 percent tax bracket in america, and at that time was only working because the work was fun. After finding that the director of one of his films was a complete pain to work with, he pointed out that when they stopped being fun to make, he would stop making the films.

If you take 2 pounds per head of population away from the rich, and give it to the poor, you find that the poor will probably just buy and extra pint or pack of fags. if you leave that same money with the rich, they will often either put it into the bank, meaning that you can borrow easier to get a mortgage, or a business loan, or they will invest it in growing a business, which may end up employing hundreds of people.

Once you have more than a certain amount of money, it really is hard to spend it well without creating wealth and assets. Similarly, once your income is larger than a certain amount, it can be easily grown into something much larger.

All it takes is the intitial seed money, a good idea (at the right time), a relatively small amount of good luck, and plenty of hard work to make sure that when you get the good luck, you can take advantage of it.

<>
This is a very sweeping assumption, one that tax cuts here (NZ) and the USA have been based on in recent years - and quite absurd.
I could as easily say that the poor will use the money to take their child to the doctor, and the money will therefore circulate back again, and the rich will put theirs under the mattress to gloat over. Same sort of unfounded assumption...

It isn't quite as unfounded as you think.

if you are poor, you tend to use booze and fags (and other drugs) as a way of temporarily relieving the problems of extreme poverty (1/4 average earnings).

you also tend to have more debt, and lower savings, and generally are just not as carefull with your money.

Once you have more than about 10,000 in the bank, you have to start paying attention to the money and how you have got it invested, else you end up losing a lot of money because of not having the right interest rate.

A friend of mine with a couple of hundred thousand in the bank has found that it makes a difference of pounds per week just moving the money to get an extra 0.1 percent.

If you only have a few hundred in the bank, you don't tend to notice such small differences as much.

While it might be true that in some cases the individual in question will use the extra money wisely, it has been shown time and time again that those who are poor generally don't know how to handle money. (for example those who get big cash prizes tend to have frittered them away within a few years).

The rich definately don't put money in the matress to gloat over, they tend to realise just how much money they would be losing in interest if they did. for example at the moment you can get 11 pounds per month from an isa on 3,000 pounds.

A surprising number of poorer people have money sitting in low or interest free places, even when they are paying 15% plus on outstanding debt. This is just something you don't spot with those who are independently wealthy (never have to work again).

<>
On the other hand, they often know very well how to handle money, because of having to budget so tightly. I speak from personal and family experience...
NB - I earn (when I work) considerably less than the average wage, and because of the type of work I do, am woefully underemployed. Studies have shown that the majority of stinking rich people didn't *make* their money by their own work, but inherited it. Tust fund babies have frittered it all away (though in some cases that takes real effort, if they have, say, $70 million) but many invest their $100 mill, sit back, and condemn the workers in their factories to low wages and then slag them off for being poor losers who can't handle money or get rich!

All you are saying that people who have money are good at looking after it.

Now subsitute money with 'Tropical fish'.

I have tropical fish, and have had them for two years - becuase of this I know how to look after tropical fish - therefore I have a healthy tank full of tropical fish. I've had them for some time, so I know which sorts of fish are likely to eat the other sort. I know that they are well from the way that they act, I know how much to feed them and I know when to change their water - and I know how much of it to change without upseting them too much. I know what they look like when they're too hot - and when they're too cold - the tanks under the window so it does vary in temperature.

If I gave a tank full of tropical fish to a person who knew nothing about them they would die because they didn't know how to look after tropical fish.

I learnt to look after them partly from books, and partly from making mistakes and then corrected things. .

while some of the extremely rich might be "trust fund babies", that tends to only last for a couple of generations.

some of them might however use the trust fund as seed money for business investments.

Obviously you are among the group who can handle money. I also trust from your comments that you pay of your most expensive loans first, don't buy non-essentials when you are in debt, build up a savings reserve as soon as you are able, and all sorts of other good money management practices.

I would also guess that you don't drink or smoke, unless you have savings at the time, and can thus afford luxuries, and also buy stuff from the "reduced to clear" section of the supermarket.

Or am I wildly off the mark on that and you are less able to manage money than you imply?

I also trust from your comments that you pay of your most expensive loans first, don't buy non-essentials when you are in debt, build up a savings reserve as soon as you are able, and all sorts of other good money management practices.

I would also guess that you don't drink or smoke, unless you have savings at the time, and can thus afford luxuries, and also buy stuff from the "reduced to clear" section of the supermarket.

Yes I do incidently. How did you guess.

And how do I know how to do this? because I was brought up on benifits that's how.

In fact I tend to go for the economy section, of the supermarket as that's cheaper than the reduced to clear section.

how did I guess, because those are all signs of someone who knows how to handle money, as is buying stuff in bulk, especially when it is temporarily cheap.

I also spent a lot of time on benefits.

However I also know a lot of other people on benefits, who smoke, drink, run up large credit card bills on luxuries and even day to day running costs like gas and electric bills.

Obviously I also buy the cheapo supermarket own brand stuff a lot of the time as well.

and all of those tips have appeared on the bbc show "your money or your life", which advises people how to solve debt related problems.

Yes and that programme also shows a lot of middle class people who manage to get into debt in incredably stupid ways. '

I remember watching once and I saw that a couple who earnt 60K a year on the verge of having their house repossed for the second time.

There are also those very rich people who manage to get into considerable amounts of debt -the late Queen Mother being an example.

yes,some of the people featured are also fools, but the reasons for their debt usually make sense (but not always).

I remember that one as well, and if my memory is accurate, they earned 60k and spent 90k with friends and family "lending" them money with no reasonable chance of getting it back.

It is largely a matter of training, how well you manage various aspects of life, and you would not believe just how many people have been given disasterously bad training by experience and friends setting bad examples.

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1. I don't have any debts - except the regular power and phone accounts every month. No credit card, no HP, oh, I do have a student loan, but I don't earn enough to start paying that yet. (Here there's an earnings threshold. I am below it)
2. No, no non-essentials at any time, but as stated above, no debt.
3. You're right about the savings reserve.
Yes, I do smoke (most people working in the mental health/disabilitites area do, for some strange reason, just as in the 1980s, most GPs were smokers. Dunno why.) But no, I do not drink alcohol. Period.
Yes, of course I buy 'reduced to clear' unless it's spilled shampoo and dented tins, as it often is at our local.
All the above applied to by parents, who lived a 'green' lifestyle, (didn't buy vegetables but grew them, recycled and composted etc) Not as a researcher elsewhere sid 'middle class' at all. We managed comfortably as children, but then libertarian principles were put into practice in NZ in the late 1980s, and it all went to hell in a handbasket. The usual fruit of libertarianism ensued - low wages, high unemployment, tax cuts for the rich, cuts in services (health and education) for the poor. Student loans were introduced, companies went belly up, wages got lower still... you get the picture.

I do indeed get the picture, but that isn't really much to do with libertarianism, and is more to do with bad government.

Often those measures are done initially to counterbalance the punative taxation of the rich by socialist governments, but not always. When it gets to be a problem, they tend to have gone too far down that route.

Libertarianism is not incompatable with fairly high, redistributive taxation policies combined with things like a good social security safety net, free at the point of need health care, minimum wage, etc.

I myself live by a few basic principles, including minimisation of dependencies and the principle of enlightened self interest. I would have absolutely no problem with the uk having taxes which combined to be near european levels.

The problem I have is with the related incompetences which tend to go with them. I tend to prefer small government, based upon lots of experience of local, regional and national government being less able to do things for me than I can myself if given the same money.

A simple example of this is the national health service. it has been given something like 30% more money to do the job, with only about a 5% improvement in the outcomes. during the same period, some counties have become nhs dentistry free zones, combined with a massive expansion in the post code lottery for treatment availability.

I have no problem with them continuing to get the same (or greater) amount of money, but the lottery needs to go, as do ost of the branded generic drugs, and a whole host of other systemic problems which can only be solved by reforming the system rather than just throwing money at it.

As a country it is fairly easy to decide what you want to provide, figure out what tax you need to raise to do it, and then do the tricky bit of deciding how to balance the tax take properly. this is usually where most forms of government tend to make a complete dogs breakfast of tax.

They don't like rich people, so that punitavely tax them and they leave. they like tax cuts, so they do that rather than paying off the national debt. They like id cards, so they legistlate to do them in an expensive and ineffectual manner.

I could go on, but that would then start to look party political due to most of my best examples being recent, which is not my aim, and would detract from the discussion.

Well a considerably amount of the money that has been allocated to the NHS has gone towards training of new doctors and nurses.

Thee first intake of nurses under the increased numbers will graduate in June, and the first intake of doctors (including me) in August 2005 .

So you can't comment on the impact that spending has had until we're actually working.

yes, and about time too. an earlier government cut back too far in an attempt to spread the teaching hospitals around the country, rather than keeping them all in london.

another thing that money has been spent on is captial projects like building new hostpitals.

but at the same time we still have doctors handing out antibiotics like candy. we still have massive underprovision of specialist beds, and the care for the elderly and disabled leaves a lot to be desired as well (I am speaking from experience here).

I am not criticising the professionalism of those in the nhs, only the effectiveness of the management in tying results to extra cash without major reform.

also, career paths in heath, education, research, etc need major reform as well.

<>

I am a bit confused there, xyroth - branded and generic are opposites! If you mean the branded ones, then that's a problem with a mixed system, such as under our previous government, when they were paying private hospitals and clinics to carry out elective surgery (and one private hospital became famous for its flamingo ups, such as operating on the wrong hip in hip replacement - they did *that* twice!

I will clarify a bit.

Branded drugs are developed by the original supplier, and thus are expensive because they need to recoup the development costs.

generics are what these drugs become once the short term patents run out. The government has said that doctors should prescribe these in preference to branded drugs.

Some drug companies provide generics under a brand name, often with a higher price than the original branded drugs. Some doctors cooperate with these drug companies to get the massively better commission from the drugs companies. This conforms to the letter of the advice while massively breaching the spirit.

see http://www.xyroth-enterprises.co.uk/getmeds.htm for more info.