Month: June 2014

A couple of postscripts to the last post, to try to answer the question why it would be such a bad thing for money to lose part of its meaning as naming the difference between the benefits provided to the public by the possessor of the money, and the benefits received by the possessor from the public at large.

Going back to Steve Jobs, it is clear to me that when I bought his products (with the exception of the Newton!) I was getting very much the better of the deal. I didn’t exactly cheat him, but the extent to which they have transformed my life in a mostly beneficial way far outweighs whatever benefits in terms of teaching, writing, and so on that my money names. Part of the reason why this imbalance didn’t impoverish him (and reduce back to peasant famine conditions the Chinese urban workers he employed) is the use of money itself, with all its necessary adjuncts such as banks, fraud laws, and so on. If my iPhone used the technology of ENIAC,IBM’s early computer, it would weigh around five million tons, take up around 300 million square feet of floor space, and cost about 67 billion dollars, by my estimate, for its memory and processor alone. The change this represents, the staggering increase in human welfare, was driven by the fungibility and stability of money and its role of naming and providing knowledge to the marketplace.

If money were to lose its meaning–by widespread theft, corruption, state or private currency manipulation, sumptuary laws, legally-permitted rent-seeking, or high levels of taxation–then that benefit would be lost. And the wealth that Piketty hopes would be shared would simply go elsewhere, to a sounder currency–as it does in any country where vendors at borders buy and sell hard currency. And if all national currencies would lose their naming value, then the wealth would go into something else, far less fungible and available for use by the many–airline miles, precious metals, real estate, bitcoin, works of art from Sotheby’s, or class markers like the accent one gets in a finishing school. Wealth would then become sequestered and the velocity of its exchange would be slowed, resulting in ossified sociopolitical structures. Arguably, the feudal systems of Europe, and its present persistent class systems, were precisely the result of a flight from the Roman Denarius because of its misuse.

A sensible international inheritance tax would avoid many of these problems, it seems to me. The only bad effect might be to diminish the sense of duty one has to one’s ancestors, and to render less reliable the extent to which any person could represent, stand for, or be the agent of another.

The more money a very rich person has, the smaller the percentage of his or her wealth such a person can actually spend and consume. You can’t eat a hundred meals at once or drive a hundred cars at once or get a hundred PhDs. So the wealth has to go somewhere, i.e. to other people in one form or another, as wages, investment capital, or lower bank interest rates. Even if you just hide your money under the bed, that constitutes an interest-free loan to the Treasury and to us, the people. In other words, rich people are already paying a wealth tax, i.e. all the capital they did not manage to destroy by consuming it.

If justice were to be served in terms of reward for services rendered, someone like Steve Jobs should have been able to consume a million times as much stuff–clothes, entertainment, information, food, etc–as the average person. But he probably couldn’t consume much more than about ten times as much. What he did for others was so much more valuable (in terms of the demand) than what others could do for him that it would have been hard for him to find anything equal to it for himself to consume. Maybe he could look at lots of great works of art, but the rest of us do have museums. Maybe he mightn’t be as stressed as someone working hard at a repetitive job. But like all humans, he had plenty of stress already, like dying of cancer.

A world wealth tax would be a bad idea, because money is an illocutionary act or performative statement, in this case an act of naming. An amount of money is a name for the amount by which the bearer of the money has done more good for other people (in their opinion) than they have done for him or her. A wealth tax is a way of falsifying that act of naming, as if a meter or a pound or a liter or a degree of temperature were by law bigger or smaller for rich people than for poor ones, or as if, having been taxed at say 50% by the government just for being rich, every dollar of his represents twice as much benefit to others and half as much benefit to himself as does the poor man’s dollar.

Where Piketty may have a point might be with inheritance taxes. I certainly owe Steve Jobs much more money than I have ever spent on Apple products, but I don’t feel that I owe his heirs anything at all. I am willing to concede some transferred obligation to them because of my respect for his will, but not much. And as for their heirs, very little at all. I think the obligation implied by money, let’s say, is not very transferable to a representative or beneficiary. So an inheritance tax would actually reinforce the illocutionary force of money, rather than damaging it.

Maybe President Obama should take a leaf out of Nixon’s book and go to Iran. That would really dish Putin, put Iran in charge of our mess in the Middle East, and get Iraq off our hands. It would also mean supporting an imperfect but fairly stable democracy rather than having to choose either military dictatorships like Egypt and Syria, or fanatical proto-theocracies like ISIS and the Taliban. Iran could pay for the privilege of having its own sphere of influence by recognizing Israel.