Motivation in a High-Tax Environment

There must be two types of capitalists, those who want capital for good uses, benefitting technology, society, and other non-self entities, and those who want capital to keep for themselves or for their families and groups. The first type is the one that those of the second type refer to in public when pleading for an absence of restrictions on their ability to amass capital. There certainly are capitalists of the first type and much of the productive sector of the world was built by their efforts. However, they seem to be less and less a fraction of the total, and the second type, armed with their public relations stories about the first type, are becoming more and more of the total.

There is no dichotomy here, but rather a distribution. There are capitalists who are almost exclusively first type, as well as many who are almost exclusively second type, but then there are others in the middle or far over to one side of the distribution or another. For simplicity in discussion, however, a dichotomy works well, even though it is only an approximation to reality.

The public relations story is truthful but misleading, and ignores one critical fact: the existence of type two capitalists. The story explains that without capitalists, assuming all or most are type one, there would be no advanced society, no modern technology, no freedom from backbreaking toil for a large fraction of the population, no plethora of consumer goods, and on and on. Even abstract quantities like democracy or justice or some other poorly-defined but highly-admired concepts are enlisted into the campaign for an absence of restrictions.

Once the public attitude has been properly adjusted, all manner of predatory practices can be approved by whatever governance does such approvals, disguised under the veil of allowing more of these former benefits to be generated by now-unrestricted capitalism. It takes some highly focussed detective work to appreciate how the details of the economic system will change under the removal of restrictions, or even how it operates without them in the first place, and only such detective work might reveal just what goes on. Such detective work is largely unreadable, certainly not popular, and therefore pretty much ignored. The society that follows this path finds itself in less and less favorable territory, except for the predatory capitalists who find themselves like foxes in a henhouse. They have a good time. Society simply suffers.

There is another barrier to the imposition of barriers to predatory capitalist trickery, and that is that these methods are often buried deep in accounting nomenclature, and also there are many variations of them, so regulations to prevent one might miss a neighboring one. Some restrictions certainly are possible, however, and the effective ones are those against which the public relations campaigns are mounted.

For every restriction that is effective, there must be multiple blocks of bureaucrats to monitor them, investigators to detect violations, and prosecutors to enforce them in the face of violations. Since the law might be somewhat arcane, this means the public has little input into this monitoring. It is also a field day for those whose capabilities lie in the area of legal obfuscation or accounting complexity, leading to high costs for monitoring and enforcement, and perhaps a low success rate of enforcement. Then there is the technique by the second type of capitalist public relations teams in making seeming small changes in the regulations, but ones which open loopholes, or of replacing the regulations with something with approximately the same name and ostensibly the same purpose, but with no capability of having any effect on the predatory behaviors.

The novel economic system proposed in this blog, Just Deserts, tries to solve this problem of massive complexity, which favors predatory practices as a ski mask favors band-robbing, with a simple substitute: high income and wealth taxes. If no one, no matter what type of behavior they do, legal or illegal, can amass either a high income or large wealth, there is no point to doing anything disadvantageous to society. The only difficulty lies in constructing the tax system and enforcing it, which is substantially easier than regulating a myriad of financial transaction and ownership behaviors.

The tax system on income and wealth would be designed to reward someone for their efforts and their good use of capital, but only on a scale commensurate with their own contributions. This is called the principle of earned income, and recognizes that people have different skills and capabilities, and have different desires for the amount and difficulty of work they undertake, and calibrates the rewards they wind up with accordingly. There is no way that one human being’s efforts can be worth more than a few times the average. An individual’s body can only do a few times the average before tiring. An individual’s brain can only process data a few times the average in any given period. This means that their incomes, if measured by their contributions of time, talent and effort, can vary by a factor of a few. And this means that their accumulated wealth, if they work hard and spend little, can only be a few times more than some multiple of average income. All the rest, meaning all the huge incomes and accumuations of wealth we see today, is unearned, and are benefits earned by others but not received by them. Some quirk of the economic system that has grown up in place allows that, but the growth of these systems was only allowed because of a lack of appreciation of what earned wealth is.

The tax system might have many details to it, so that there is a gradient between professions to allow under-filled ones to attract transferees and students. The tax receipts would have to be diverted, to a very small part, to the task of education of applicants for under-filled professions. Taking risk could be rewarded, within the confines of the overall limits on income and wealth, or punished if the risks turn out to be poorly conceived or poorly executed. Different means of collecting undistributed benefits, the production of society, and distributing them to those organizations and individuals who would benefit from having control, but not personal ownership, of large amounts of capital must be constructed and made to work.

Just Deserts is not simply high-tax capitalism, as the tax policy has to be carefully crafted to do several things. As just mentioned, one is to replace personal accumulations of capital and its deployment to useful purposes with something which accomplishes the same thing without personal ownership. This has been discussed in previous posts. Another task which must must be done is the allocation of rewards in proportion to productive tasks undertaken and accomplished. This is closely tied to the problem of motivation.

In a nutshell, the problem is this, expressed as an example. How could society induce someone to work hard and create a new business when the most they could expect to personally gain is, say, up to five times the average income of fully and gainfully employed members of the society? This question is said in a very misleading way, similar to that which might occur in a public relations presentation of the seond type of capitalists. It has a hidden assumption, which is true for a second-type capitalist but not a first-type capitalist. That assumption is that individuals are only truly motivated by the money or benefits they receive, nothing more. This is probably true for second-type capitalists, as they were reared in an environment where the possession of wealth was regarded as the epitome of success and the inevitable provider of happiness. A first-type capitalist can only exist if raised with environmental influences which say the opposite: that a person’s self-worth is centered on how much he produces, not how much he consumes or accumulates.

These fundamental learnings occur when someone is young. They originally come from the individual’s parents or other adults who are in frequent contact with the child. This may include older siblings. As the child grows, and begins to try to adopt the values and attitudes of those he sees, without any type of filtering, those whom the parents hold up as admirable provide the collection of traits that the child absorbs as desirable, and which are incorporated in the child’s brain as sources of happiness. It may seem strange that the organization of society is so dependent on the upbringing of small children, but a child forms the sources of happiness which will serve as motivations at an early age, and then grows to try to fulfill them in later years.

Other sources of this early happiness associations include media, meaning books and more active media, such as video and audio sources. Herein lies a difficulty. Even if the parents and guardians of the child are strongly motivated to appreciate production and their role models, transferred to the child, are those who have been successful in production of socially useful goods, a corrupt media can still tend to overwhelm that teaching. If the media is simply a grandiose advertising campaign, owned and orchestrated by those who benefit from merchandising their company’s products, the child will absorb the idea that consumption is the only desirable form of existence, and production is simply a means to that end. Thus, a corrupted media leads to a society filled with people for whom a good economic system such as Just Deserts is doomed to fail, as they are ones who would have no motivation other than to accumulate possessions or experiences. So, if Just Deserts is ever to be implemented, there must be an effort on the part of those who form the early impressions on young minds to support happiness from what one produces, not consumes, and a revolution in media from an advertiser-supported business model to a subscription one. The alternative may be for society to gradually deteriorate.