Incentives To Production

"The way to maximize production is to maximize the incentives to production.*  And the way to do that, as the modern world has discovered, is through the system known as capitalism - the system of private property, free markets, and free enterprise."

Henry Hazlitt (1894 - 1993)

Why is this so hard to understand?

When people are free, and their abilities are left unfettered, each free person will find what they want to do the most, or can do the best, and seek that thing.

"What do you want to be when you grow up?"  That starts out as a dream, but as we get older and more focused it becomes, in most cases, a reality.

What happens when the ability to seek or begin one's most-desired occupation, or start one's business, is hampered or even squashed by a lack of employment opportunity, severe underemployment, and general economic stall?

According to a survey recently published by Forbes, nearly half are dissatisfied with what they do and 81% are unhappy overall.  That is not a new statistic, and not at all surprising.  I heard those exact statistics in surveys taken when I was in business graduate school in the late 70s.  There was a general lack of "incentives to production" then too.  I remember a certain talking head on the TV, wearing a cardigan, calling it a "malaise," and telling us it was OUR fault!

We Americans, indeed people the world over, free or not, desire occupational fulfillment and happiness.  Particularly those who have been in school or training for long periods of time, and have their career paths hopefully mapped out, and are eager to get started. 

Everyone thinks they can contribute, wants to contribute and desires to contribute.

But what if gubment control, increased taxation, regulation of industry or job entry, permits and licensing, redistribution of economic activity, and ever-growing bureaucratic control clobber those "incentives to production?"

Answer me - what would you prefer to do with your life - contribute WHAT YOU accomplish or redistribute WHAT YOU  accomplish?

That's an easy one.

Oh, redistribution is NOT contribution.  Taxes are not investments.  To have bread taken from you and your family is not patriotic.  None of that "spreads the wealth around."  And all of that squashes "incentives to [such] production." 

AND IT CAUSES MALAISE.

People who say such tripe (patriotic contributions and investments) are the equivalent of pigs walking on two legs trying to control a barnyard.

Period.

* The underlining is mine.

The Nature Of Private Property

"If man in the state of nature be so free, as has been said; if he be absolute lord of his own person and possessions, equal to the greatest, and subject to no body, why will he part with his freedom? Why will he give up this empire, and subject himself to the dominion and control of any other power? To which it is obvious to answer, that though in the state of nature he hath such a right, the enjoyment of the property he has in this state is very unsafe, very unsecure. This makes him willing to quit a condition, which, however free, is full of fears and continual dangers: and it is not without reason, that he seeks out, and is willing to join in society with others, who are already united, or have a mind to unite, for the mutual preservation of their lives, liberties and estates, which I call by the general name, property."

John Locke (1632 - 1704)

This is an individual who's thoughts and writings about freedom and natural law had a great influence on those who founded the United States, and on one Thomas Jefferson in particular who wrote the Declaration of Independence.

To wit - if an individual is, by a state of nature, master of property earned and owned, and finds the enjoyment of that property to be unsafe or insecure, that individual would reasonably seek out those of like mind and unite with them in the interest of preservation of that property.

So, then, what is property?

The word's origin is Latin, proprietas, from proprius, meaning 'one's own, special.'

From my Oxford dictionary, the definition of property, as it applies to the law, is "the right to possession, use or disposal of something; ownership."

Does it not follow, therefore, that the Founding Fathers, so influenced by such natural law as private property, would choose and develop an economic system that encourages capitalism, free enterprise and free markets?  If a legal framework that encourages moral and voluntary exchange is not integral to the system, the government they founded could not exist!

And if these masters of the ability to possess, use or dispose of their private property feel it unsafe or insecure, or are under the threat of having it more and more completely or forcefully removed, what does Locke suggest they would reasonably do?   

SEPARATE AND UNITE WITH THOSE OF LIKE MIND.

Interestingly, in my previous free enterprise quote, Ayn Rand suggests that the death knell of any nation would happen when one half of a population is expected to support the other half that feels entitled to that support.

That is the very premise of her book Atlas Shrugged.  In that book those with ownership of tangible, financial or intellectual property do separate and unite.

In order for this condition to be reached, property owners have to be identified by how much they possess. 

If income level so determines their identity, or income earned from PREVIOUSLY-ACQUIRED possession, any level is baseless.  No matter one's income, someone else will consider that "rich" by comparison!  And when an overlord determines the level of income that must be treated differently, no matter the level, it can only be ARBITRARY. 

Why?  For certainly, CERTAINLY, that level will encompass a great number of people whose income is LESS than than is earned by the overlords, and the overlords will justify ways, and find ways, and install ways around its application to them!  Whatever the overlords can and will do to benefit themselves will be "legal."  They will protect their property with the law!  And if those same things were to be done by the rest, well, that would be considered "illegal."  They, a separate class, would be punished by the law!

The phrase "four legs good, two legs bad" applies well!

Eventually that pinpointed income level will not provide enough for redistribution to the "entitled" or "dependent" class and redistribution will have to increase as the arbitrary, taxable, income level is lowered, and lowered, and then lowered again.

So, when do those whose earned property is so threatened that they do in fact seek to associate with others of like mind?

THAT, BROTHERS AND SISTERS OF THE CONGREGATION, IS YET, AND PERHAPS SOON, TO BE SEEN ... STAY TUNED.

Have We Reached The Tipping Point?

"When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friends, is about the end of any nation."

Ayn Rand (1905 - 1982)

This scenario has been on the minds of many people in the past few days.

Is it possible that the United States has reached this tipping point?  If not, how close are we?

We certainly know that there is a percentage of any vote that looks for gimmes.  We could accurately call it The Gimme Vote.

If there is The Gimme Vote, what is its percentage of the total vote?  30%?  40%?  What is motivation for The Gimme Vote to vote differently?

We know that one of the larger two parties has a reputation for gimmes, as perceived to be provided by a larger and larger gubment.  And the other larger party, well, is said to hate, and take away, and prevent gimmes, wanting instead a smaller gubment.

So gee, where would the percentage of the populace that wants the gimmes go to vote?

Here are the two positions as envisioned by Ayn Rand's quote:

Party One - vote for us because we will tax the bad people and spend the money on you.
Party Two - you won't need the "help" of gubment because we will help create the economic growth that will ensure you a good job and you will be able to take care of yourself.

Party One surely cannot exist without a dependent class.  Are they going about trying to make that class bigger?

And Party Two surely cannot exist if there is a large, and getting larger, dependent class.  If it continues to exist, it can and will only do so as a minority party.  And, as things continue, as a minority it will get smaller and smaller.

So, my question remains - is it possible that the United States has reached the tipping point?

And if so, what does that mean?  It is said that there are 10,000 Baby Boomers retiring every day, who will no longer be paying the taxes they did while working.  At the same time, gubment is getting larger and larger and filling its old and new bureaucratic nooks and crannies with more people who are paid by taxes.  As these two things happen, the POOL of taxpayers will NECESSARILY shrink.

Each of those taxpayers, NECESSARILY, will have to shoulder a larger and larger burden.

NECESSARILY!

Notice that the POOL is not getting any larger.  Gubment does not create economic growth.  In fact, it can squash it, and does so with laws, licensing restrictions, regulations, taxes and fees, and forcing its people into more and more "programs."

But isn't gubment taking water out of one end of the POOL, say the deeper (richer) end, and pouring that same water into the other side of the POOL, say the shallower (poorer) end?  Is the dimension of the POOL getting bigger?  But the number of people wanting to swim in that POOL is increasing every day!  Will there not one day be a water overflow, no matter how much is poured from one side into the other?

I know the popular term now is "fiscal cliff."  In this metaphor, it might more appropriately be called a "fiscal overflow."

At what point, if it has not happened already, at what point does this naturally retiring 10,000 not get supplemented by more people, every day, who simply say they aren't participating in this gimme thing anymore?

Atlas is shouldering the world.  The load is getting heavier and heavier.  When I hold a weight I know that it seems to get heavier with time.  The load surely is getting heavier and heavier for Atlas with time.  Is Atlas shrugging? 

And how many John Galts would that create?

A Conquering Group Is Needed

"Unhappy is the fate of one who tries to win his battles and succeed in his attacks without cultivating the spirit of enterprise, for the result is waste of time and general stagnation.  When a rare opportunity comes, do not hesitate, but swiftly accomplish tasks that are otherwise impossible."

Sun Tzu (544 BC - 496 BC)

Known best for his book The Art of War, Sun Tzu did not live long but has a long legacy.

Whether he was a real character in Chinese history, or his book can be attributed entirely to him or other family relations, it doesn't matter.  We regard the book attributed to him for what it is.

THIS IS A BOOK THAT HAS BEEN READ FOR CENTURIES BY PEOPLE OF ALL STRIPES AND OCCUPATIONS.

And business leaders and others involved in free enterprise would do well to read it too!

Why?

What is the competition of business if it is not strategy and tactics, offense or defense, attack or feint, and all the many other adjectives and verbs that can be applied to warfare?

Now, we would like to think that such business competition plays within certain legal parameters! 

But cannot the death of one or the other competitors not be the ultimate result, figuratively speaking of course?

But would Sun Tzu understand a war where two entities are struggling one with another and a third, more powerful entity, began directing traffic. 

What would Sun Tzu have to say if that third, more powerful entity, began laying down rules that favored one warring party over the other? 

Or if the more powerful entity began restricting when and how each warring party went about organizing itself, put together its resources, went about finding more resources, or could operate at all?

Or if the more powerful entity began taking resources from both warring parties?

I can't think of a time in war when such a thing happened.

But really, what would Sun Tzu have to say?  It could be that he would suggest that the two warring parties combine in the common effort of dismantling the outside, more powerful entity!

For if they do not, no matter the outcome of the war between the two parties, neither, in the end, will be able to survive as they had imagined.

These two warring parties would have to understand that the direction and thinking of the more powerful entity would have to change.  

And they would have to understand that their forces would need to combine.  

And they would have to understand that their goals would NEVER be realized, they would NEVER be able to cultivate a spirit of enterprise, and the result of their not combining would result in a waste of time and general stagnation.

Sun Tzu was a an understanding person.  He understood human nature.  He understood the thinking of leaders.  He understood competition, in war or otherwise.  And he understood how those who do not pay attention to his words, and do not combine forces when necessary, will indeed STAGNATE.

There is an entity out there that is becoming a more powerful entity with every law passed.  

I think we should combine forces and, in the spirit of Sun Tzu, take advantage of this rare opportunity to throw the bums out so we can accomplish tasks that are otherwise impossible.

Read the quote again!