Seems to me Clayton has a point. Because although we cannot say with precision exactly what a persons scale of values is, it is probably safe to agree with Abraham Maslow that almost everyone has roughly the same heirarchy of needs. First air water and food, then safety etc.
The more money one has, the higher up the heirarchy he can go. And the first levels of the heirarchy are more important to everyone than the later levels. So that the money a poot man has is more important to him because he uses it all to get only the most important things.
Dave, Clayton provides a thymological analysis that may have powers to convince in certain scenario with those that will accept his assumptions. I must emphasise that leaning on marginal utility to make the force of the argument is somewhat deceptive when it is not acknowledged that one is using marginal analysis outside of where it can be relied upon to contribute to a valid ptaxeological argument
(1) Any X is worth more to the ones that have less of it.
(2) X must be allocated to whomever it is worth more.
If (1) and (2) then any scheme that would try to achieve (2) must inevitably converge to a point where everyone has exactly equal amounts of X (where X is any ownable property). Now let’s discuss how one may put such scheme into action…
A dollar is certainly worth more to a poor man than it is to a wealthy man.
Uh, no, I think it is worth more to a hoarder. Ergo, all money should be redistributed to Shylocks. And seeing how most central bankers are against hoarders, we can now clearly see they are not socialistic enough. Down with these hypocrites, comrades! /sarcasm
It is. A dollar is certainly worth more to a poor man than it is to a wealthy man. This is true by virtue of the law of marginal utility. But we can just as well say that a new tire is worth more to the average motorist than it is to a tire center, for the same reason (the tire center has lots of tires, the average motorist has just four). Yet that is exactly why tire centers exist, so they can earn a profit selling new tires to motorists. Yet no one except a thorough-going communist would suggest that - because a motorist values the tires more than the tire center does - the government should “redistribute” tires from tire centers to motorists who need them more than tire centers do.
Money is a good like any other. The fact that each dollar is more useful to the poor than to the wealthy says nothing about the justice of forcible redistribution. It’s a red herring.
Clayton -
But Clayton, claiming marginal utility as the solution presupposes that both the poor man the wealthy man reside on the same curve of utility. How are we to know if the wealthy mans utility curve is shifted outward of the poor mans utility curve? Moreover, how are to know their value without knowing it slope along the concavity of the line.
Preference is demonstrated through action agreed? We know that the poor has less dollars than the rich or thus that they value their holding less. The wealthy may indeed value the dollar more than the poor
Actually, taxes are theft, and if you had to justify anything, it would be the theft, not the measure of the theft.
Just sayin’ …
Yes, but if you know you’re going to be stolen from, one can justify wanting the stolen goods to be largely inconsequential to you (rather an old video game stolen than my tv)
Preference is demonstrated through action agreed? We know that the poor has less dollars than the rich or thus that they value their holding less. The wealthy may indeed value the dollar more than the poor
If you’re defining a dollar as just the fiat currency used to represent it, than sure… but really even that fails isn’t a very individualist approach to it.
But if you’re defining a dollar as its’ representation of a given amount of goods and/or services, the picture becomes far less clear, and tilts a lot more heavily to the poor.
If a wealthy man passes a dollar on the road he may pick it up and bank it. If a poor man does he’s buying a sandwich. There’s a reason poor people tend to save less, and just saying “they value dollars less” really misses the mark.
Marginal utility applies to individuals. There is no such thing as interpersonal marginal utility. That is, your first dollar is worth more to you than your second, which is in turn worth more than your third, and so on. It is impossible to determine whether your hundredth dollar is more valuable to you than my first is to me.
I would day that I’m going with Dr. Block on this one. There’s no reason to assume that a rich person and a poor person are on the same utility curve. A rich person could also be on a higher utility curve in which case, redistribution would result in a net loss.
@nir: I see your point. I guess I’m using mainstream economics methods which tend to aggregate people and treat valuations as fungible between individuals. Anyway, my point is useful for arguing against redistribution on utilitarian grounds within the framework of mainstream economics.
Well, I think that if we’re going to take this route, the best you can say is that we cannot compare the valuations of two different individuals for the same good. Each individual prefers a dollar over against the alternatives facing him in his own way.
marginal utility is already priced into the market. the poor man is willing to give up more of his time for $20 than the rich man because it is worth more to him.
It is still impossible to compare. Perhaps the rich man values his time more than his money, but values his money more than the poor man values either. Comparison of utility between the two necessarily becomes “One values x more than the other values x” which is impossible to demonstrate.
Even when an exchange takes place, interpersonal valuations can’t be compared. That is, if you and I exchange a X for Y, we learn that, on my personal value scale, I value X more than Y, and on yours, you value Y more than X. This says nothing of whether I value X or Y more than you value X or Y. I may very well value X and Y much more than you value either, but would still rather give up my X for your Y, because it ranks higher on my value scale. It is simply impossible to tell.
I agree with that statement. If you have more of anything then the value will be considered less to that person. Same sort of concept as when you go to a wholesale shop and you purchase say a massive container of mustard. You will know that you have so much mustard and you will be less inclined to make sure you do not waste any, than if you had only one small container. But the actual value of the dollar remains the same.
That is a generalization though and you will find some rich people that will say they got rich by always valuing money. Some of the richest people I have met, have been very frugal with their money.
I dislike mustard. Therefore, though the shop owner has much much more mustard than I, I’m pretty sure he values his 100th jar more than I would value my first. He certainly isn’t willing to give me one for the little I’d be willing to pay.
This comparison I think is flawed, because money is at first a means and mustard is an end. Therefore you cannot argue that a poor man doesn’t value money just because he has none. Since money is able to satisfy all needs (money can buy) nobody will ever reject to take more if it would be offered to him for free. The same has not to be true if the shop offered you mustard for free, because you just don’t like it. But if you reject money this would imply that all your needs (money can satisfy indirectly) are saturated completely. Hard to believe of a poor man.
It’s flawed, but not in the way you say. It’s flawed because it is impossible to compare how much two people like something, especially when they both like something. We can only rank our own desires on our personal value scales. Dollars, mustard and time are no different. The poor man may value his time more than money, or vice versa, but in neither case does it give any insight into the value scale of the rich man. It’s simply impossible to compare.
At first I have to admit I have made a mistake. The mustard (tires) is for the shop owner also only a means not an end. He doesn’t use the mustard he sells it. So the mustard is not different to the shop owner than money. It only has a different liquidity. But on the other hand I don’t think that invalidates my criticism against your example. Money is a means. And means are only valued for their capability to satisfy needs indirectly. Although of course nobody can compare different value scales in detail, it doesn’t show that a comparison of the personal subjective valuation of the last Dollar the poor man and the rich man have is entirely impossible.
As Smiling Dave mentioned we are certainly capable of roughly classifying needs with a priority level. Hunger and shelter are higher valued than playing golf. If this is wrong we would see people dying from hunger at the 9th hole. Therefore it should be self-evident that a Dollar spend on bread has a higher value to a poor person than a Dollar spend on golf to the rich person.
I would agree on utilitarian grounds that redistribution from rich to poor people would increase overall happiness. I say would because this is short sighted and ignores the here well-known unintended consequences. Forced redistribution of wealth has a blow back, which has a negative effect on productivity. It is quite possible that it decreases “the greater good” more than it increases it. Not to speak of the moral issue that forced redistribution of wealth has.
Just to be clear. I am not proposing forced redistribution of wealth. But I don’t think that the argument “We can’t compare value scales of different people” is right to the extent mentioned here nor is it convincing to any proponent of redistribution of wealth.
Therefore it should be self-evident that a Dollar spend on bread has a higher value to a poor person than a Dollar spend on golf to the rich person.
Um, I think it is not self-evident. At most, a Dollar spend on bread has a higher value to some rich person than a Dollar spend on golf to the same rich person.
No that’s the minimum ;). Or you are rejecting any classification of needs that are valid for all people, but then I would ask you following question: If you had 2 children, and both came to you asking for money, one for playing golf, and the other one for food because it is starving; you only have enough for one child. Whom would you rather give your money?