Nonsense! All types of confiscation, are in one form or another, amount to the broken window fallacy. Yes we can embark on a hair splitting argument over evil vs. less evil forms of such confiscation, but the principle is the same. The “lesson” applies to all forms of confiscation and all forms of spending embarked by the confiscators.
The only “reasonable” attempt to ever try to contradict the above is by resorting to “public good” arguments.
Apparently, you have completely misunderstood the broken window fallacy. The repair of the broken window is also meeting consumer preference after it has been broken. The rebuilding of a post war city is also meeting consumer demand.
Not all forms of government redistribution of wealth are the same. There are economic differences between redistributing capital to a consumer and redistributing capital to an investor. All these actions have different effects. One will leave us with FA-FA (consumption, like in the case of redistributing from Investor A to Consumer A, or spending it on a war, et cetera), and another one with less efficient production ( FA → X; X2, where the loss in future production is represented by X-X2).
In the broken window fallacy the window is broken, it is consumed. This doesn’t necessarily need to be the only result of government redistribution of wealth. You are applying the broken window fallacy to a situation in which it doesn’t apply, or in which the fallacy has to be redesigned to fit with the assumptions. In this case we don’t have to replace the window. The window here is a factor of production, and it can be used either to produce pool of goods X or pool of goods X2 (the former by investor A and the latter by investor B), and the loss is a loss in potential production, but not in existing goods.
According to you, it is impossible to a priori decide what activity will satisfy the consumer the most. We can’'t a prior conclude that the broken window will always lead to a less efficient outcome, regardless of the entrepreneur entrusted with the task!
Again, this is a gross misinterpretation (the second sentence). We aren’t talking about capital consumption; we are talking about investment, in both cases. There is a difference between redistributing to a consumer and redistributing to a producer, depending on who the producer is. You cannot lump all redistribution under the same category, and assume that the effects in all cases are the same. The effects are always ‘less optimal’ than they would have been without the redistribution, but that doesn’t mean that the effects are the same relatively speaking.
The position you are taking now is unbelievable and rather absurd. I would spoon feed you through your reasoning errors but you seem to be determined to hold your ground.
It’s the position that I have always taken, and so it must have always been ‘unbelivable’ and ‘rather absurd’. Do you know any form of argumentation other than petty insults?
Yes, I know. Your conclusion is based on a logical contradiction, and this contradiction is the result of a logically incoherent treatment of the concept of outcome.
What ‘logical contradiction’? You keep saying this, but so far you have failed to prove it (or show it). In fact, unsurprisingly, your conclusions and mine have nearly always been the same, but for some reason you are incapable of realizing this (maybe you don’t want to realize it, I don’t know).
A “net loss” and “little gain” are logically contradictory outcome states.
What’s your point? When did I equivalate “net loss” and “little gain”?
An outcome cannot be both A and not A unless the terms and concepts are used inconsistently. This is precisely what you are doing: claiming that the outcome can be both a “net loss” and a “gain” at the same time.
I actually never have done this. My point has always been the same; that is, that there is a difference between X-X and X-X2. Or, if you want to put it in terms of ‘A’, that there is a difference between A-A and A-B, where B is a lesser number than A, but greater than 0.
Nonsense! All types of confiscation, are in one form or another, amount to the broken window fallacy. Yes we can embark on a hair splitting argument over evil vs. less evil forms of such confiscation, but the principle is the same. The “lesson” applies to all forms of confiscation and all forms of spending embarked by the confiscators.
I don’t know what ‘evil’ refers to. I’m not making a moral argument; my argument only has to do with the economic effects of the redistribution.
Straw man
Straw man
The outcome of the confiscation cannot be both a net loss and a gain (albeit a little gain) at the same time. Numerous time you’ve held the position that they are both. Now, it sounds like you’re saying: you can’t really know.
Here it is again. A-B indicates a loss relative to A. Yet the latter is not a loss but a “little gain” according to you. It’s both.
A =A and A=!A
In fact, applying your “logic” consistently, A-A (which is 0) is not a loss either, but simply no gain. While A-B is a “little gain”. Bot situations amount to no loss due to confiscation.
Where did I make a moral argument. Can you please show me?
DD5,
it might help if you tried a bit better in both grasping the argument and - if you feel like you have grasped it - explain your counter argument a bit better. I’m not the best economist or philosopher in the world, but I don’t grasp your counter argument at all. Probably I’m just not smart enough to understand your arguments, but you might wanna explain your arguments to someone who is of a lesser intelligence, please. It will benefit the conversation. 
"The outcome of the confiscation cannot be both a net loss and a gain (albeit a little gain) at the same time. "
<= This is actually quite possible. Something can not be A and not-A in the same regard and at the same time, but something can be A and not-A in a different regard or at a different time. Something can be both a net loss given one perspective and a net gain from a different perspective.
Where is the strawman? Can you please elaborate?
The outcome of the confiscation cannot be both a net loss and a gain (albeit a little gain) at the same time. Numerous time you’ve held the position that they are both. Now, it sounds like you’re saying: you can’t really know.
You are misconstruing my argument as if I am arguing that there can be a loss and a gain. I’m not making general, sweeping statements of that nature. My argument has been clear from the very beginning. The loss is represented by X-X2, but this loss is not as much as the loss represented by X-X. So, the loss is X-X2 > 0.
Where do I use the concept of ‘gain’? Only to specify that if the pre-investment quantity of goods is W, then the post-investment quantity of goods enjoyed by society is still W+X2. Within this framework, the conceptual loss is (W+X) - (W+X2).
I am making a distinction between the degrees of loss, and how the loss is actually represented. There is a difference in terms of societal welfare between the consumption of capital (and whatever goods it represents) and the production of a lesser amount of goods at the expense of the possibility of producing a greater amount of goods.
I’m not sure why my argument is so hard to understand, or where the disconnect is between my words and your consistent (mis)interpretations.
Here it is again. A-B indicates a loss relative to A. Yet the latter is not a loss but a “little gain” according to you. It’s both.
A =A and A=!A
In fact, applying your “logic” consistently, A-A (which is 0) is not a loss either, but simply no gain. While A-B is a “little gain”. Bot situations amount to no loss due to confiscation.
You need to apply it within the context I’m providing. I have always said that that X-X2 represents a loss relative to X. X2 still represents a ‘gain’ relative to no production at all or even to the consumption of the relevant factors of production (in the latter case, society becomes poorer than it was to begin with). You are trying to trump me by applying ‘gain’ and ‘loss’ in a broad context, as if I am using the two concepts in the same context. This is incorrect and miscontruing of my argument.
EDIT: Just to clarify, I’m not arguing that wealth redistribution (under any circumstance) can represent a net gain to society from how things would have otherwise been. I have always argued that no matter who the wealth is redistributed to society loses the foregone production that would have otherwise occurred. A few posts back I thought we had reached the crux of the misunderstanding between us (although, perhaps I was wrong), where I thought you had implied that all forms of wealth ridistribution represent capital consumption (in the strict sense; i.e. the capital redistributed was consumed, not used productively). Saying that the capital redistributed can be used productively is not the same thing as saying that the situation is better after the redistribution than it would have been otherwise.
Where did I make a moral argument. Can you please show me?
You should have quoted the entire passage. I never accused you of making a moral argument. I simply told you I didn’t know what you meant when you used the word ‘evil’. I was clarifying that I wasn’t making a moral judgement.
I contend that Jonathan is conflating two different questions- the outcome for two entirely different actions. It is perfectly logical that these two actions can result in different outcomes. But he is committing a logical fallacy when he is integrating both outcomes of action 1 and action 2 to determine the outcome of only action 1. I’ll explain:
Can breaking a window ever lead to more of an economic gain then if it hadn’t been broken?
Okay, they broke my window. What’s done is done. does the repair now become productive?
Okay, the bombed the entire city. What’d done is done. Is rebuilding the city now considered productive?
Do you see that there are two distinct actions that can be under examination? “breaking window” vs. “repair” , or “bombed” vs. “rebuilding”
If you apply the standard for outcome as in (1), then you will conclude that all such action results in destruction, i.e., net economic loss
If you apply the standard for outcome as in (2), then destruction need not result.
So there are two entirely different perspectives from which we can determine the outcome of spending (consumption or investment) of wealth that had been previously confiscated.
The question is, what are you trying to determine? The action itself, i.e., confiscation? Or the [different] post action that takes place, i.e., repair of window, once the first action (destruction) is already history.
I never said that all forms of redistribution are the same and that they have the same effects. I said that they all result in loss and basically amount to destruction. That’s very different from saying that they are all the same.
Can you please review my response to Adrian. It is actually intended for you.
Thanks DD5 for your elaborate response. It’s clear now and I’m in complete agreement with your post.
Now - and I think this is the crux of the disagreement - is it possible that redistribution - although necessarily meaning a net loss to society as a whole - can have in fact different degrees of net loss? I think it’s quite clear that it is and I think that’s the only point Jonathan is making. (And I agree with that point too.)
Because if you redistribute to someone who invests it (and serves consumers that way), it is clear (or am I missing something) that the net loss to society is smaller than if it were redistribute to someone who just consumes it. Or would you disagree with this statement? If so, than I must ask you why?
If not, then I think we are in complete agreement.
Jonathan, what do you say?
I never said that wealth redistribution could result in a net gain, relative to where the economy would have been without the redistribution. I said that the degree of the loss depends entirely on to who the wealth is redistributed. I think addressing my diagnoses of the current debate is the best way to settle at least where we presently stand. For your benefit, I will restate it.
I interpreted your initial response to my initial post (where I write that the cost of the redistribution is the foregone production) as if you were arguing that all wealth redistribution consists of capital consumption. I will put this into context of the broken window fallacy, and so this can double as a response to that post (and I might elucidate further below). The broken window fallacy contends that the destruction of the window and its reproduction does not represent a net gain for society, but this gain is measured against the state of the society prior to the destruction of the window. The argument is that in order to produce what amounts to one window (since one was consumed) we had to use the resources which would have otherwise produced two (or one window and another product).
But this scenario is not the same as the one that I posed to show that not all wealth redistribution represents capital consumption (or the unproductive consumption of present goods). We would have to modify the broken window fallacy to illustrate how the window isn’t destroyed, but merely redistributed. Furthermore, instead of being a consumer good, the window has to be a factor of production. Both the original owner and the new owner intend on using the window for further production, where the former would produce X and the latter X2. By the nature of the subsidy, we assume that X > X2. The loss isn’t the window, but the foregone production which would have come from a more efficient investment of that window, i.e. X - X2.
Going back to my original point (about where the misunderstanding is), I am interpreting ‘destruction’ as an implication of capital consumption; i.e. it’s a semantic argument (on my part). Production still took place, but the utility of the new production is much less than the utility of the production which otherwise would have taken place. I never argued that there wouldn’t be a loss, in fact this was implicit in my first post (the one you had originally responded to). There is always a loss; I was making a distinction, though, from capital consumption and a relative loss in production (and ultimately the satiation of consumer desires). So, if you never meant to say that all redistribution amouns to the consumption of that redistributed capital then the debate is solved. All you had to say is that I misinterpreted your original point (and I actually suggest this a number of posts ago, sometime yesterday). But, then we also have to realize that your original criticism was also semantical. You accused me of being ‘too generous’, when in fact we have always said the same thing — the loss is represented by the foregone production. You simply refer to this as ‘destruction’. In the end, the word used doesn’t matter (apart from connotations, which is how I may have misunderstood your usage of it), it’s the definition, and I still hold that our definitions are the same.
Finally, to make a final point regarding the broken window fallacy (taking into consideration everything I have already said on it), I want to defend myself against the notion that I am equivalating repair and production. Like I said before, the window in my scenario was never consumed, it was used productively. In the broken window fallacy new factors of production must be used to replace what was consumed; in my scenario we are talking about a factor of production being used for a different purpose than what it was originally intended for. This is the main difference between the broken window fallacy and what I’m talking about.
EDIT: A further clarification on the third paragraph. The original owner, for all intents and purposes, does lose the window and he does need to replace it with new factors of production. However, in this case after this production we are left with two windows, not one, because the original window was not destroyed, but simply redistributed to someone who plans to use it for production. If GF represents the factors of productions necessary to produce W, then total production has been 2GF for 2W. The loss is in the fact that 2W won’t produce 2X, but only X + X2; or to simplify it, assuming that the original investor doesn’t reproduce W (i.e. moving him out of the picture), the loss is X - X2.
No dude, you didn’t say that helping people is always bad. That makes you a statist and pure, unbridled evil.
It is funny to watch you two go back and forth over the same argument when you’re both in agreement tho
From an economic perspective, this is capital destruction. NO, it does not mean that both the “forgone” and the physical broken window are identical in the physical sense. There are no burning factories. Recall that capital is not a physical construct, but a mental construct. Therefore, from an economic perspective (no, not a value judgement perspective), any form of confiscatory policy amounts to capital destruction.
If this was not the case, then you could also not say that the forgone net savings of capitalists, diverted to government consumption, is capital destruction because the capitalists had not had time to invest it yet.
Here’s what I’m saying in conclusion: It is nonsensical to say that there is indeed a net loss (as you also say there is), but also that no capital destruction or consumption. Loss always results in capital destruction. You will have to contradict yourself (and economic theory) to contend otherwise.
The difference is rather superficial from the perspective of the economic “lesson” that the fallacy teaches us.. There are goods not being produced on account of the capital diverted from where the consumers commanded it to where the government directed it. And it matters not so much, like you think it does, that this diverted “production” can be profitable in money prices. Recall that the repair of the window is also profitable. After you bomb a city, there will be a lot of profitable contractors. so what?
Also, the difference between diverting capital through government consumption or direct “investment” (as in your case) is also not so important in terms of the “lesson”. I don’t contend that there is no difference. Merely that both still amount to a net loss, therefore, destruction.
Yes absolutely. “different degrees of a net loss” is perfect, although my intention was never to start a hair splitting debate over what is more evil or less evil. My intent was to show that it always amounts to loss, and that any loss amounts to capital consumption, or more accurately, destruction since we are dealing with a deliberate act of violence as the cause. I object to the [self contradictory] idea that some forms of confiscatory policy amount to capital consumption, while other may not. I don’t (and never did) object to the fact that not all forms of government spendings are the same.
You have to interpret what others say within context. In the real sense, whatever capital goods (to distinguish from capital) were destroyed were those foregone, so saying that the loss is in the capital good production foregone is exactly the same thing you mean. It’s a game of semantics (my original contention, which you for some reason denied); I never said anything incorrect. The notion that I was ‘too generous’ would only be true if we were talking about using damning language to condemn wealth redistribution, but the definitions of the terms used were exactly the same thing (i.e. what was meant is exactly the same thing).
On the other hand, you continue to miss the difference between my scenario and the broken window fallacy (and instead purport that the difference is only ‘superficial’). If we assume that all factors of production are non-specific (for the sake of simplicity), then what is being transferred are non-specific capital goods. The physical transfer is in capital, which is monetary, but all this translates to is the ability to purchase capital goods. Let’s assume, for the sake of simplicity, that the capital goods bid for are the same in the case of both entrepreneurs, so ultimately what is being transferred is group factor of productions GF. In the broken window fallacy W (which we can substitute with GF) is being physically destroyed in an act of consumption. This is not the case in our scenario, where GF (W) is being used as an investment.
Like I modeled originally, in the broken window fallacy we have W (window) and whatever factors of production necessary to produce W (we’ll call it FP to distinguish from GF). W is destroyed, and so we need to apply another FP to build another W. It amounts to 2FP → 1W, whereas it would otherwise be 2FP → 2W (or 1W and something else). This is not the case if the scenario presented in this debate, where 1W (or 1GF) continues to exist after the redistribution. So, even if the original investor has to replace this loss, we still have 2FP → 2GF (2W). The loss isn’t represented in the 1GF (or 1W) but in the foregone production, previously modeled as X - X2, where X > X2 > 0. For our scenario to stay true to the broken window fallacy as stated in the fable, then W or GF would have to be consumed unproductively (i.e. consumed without production).
This is not to claim that society is not at a loss. Society clearly is at a loss, but the loss is represented by whatever production was foregone to subsidise the less efficient producer, where as in the broken window fallacy the loss is W (or, if we assume W to be a factor of production then it’s X [W is consumed while producing X]). So, to restate it:
Loss in broken window fallacy (assuming W is a factor of production): X.
Loss in our scenario: X - X2
X > X - X2 > X - X (0)
This way of saying it is actually much more accurate, and incorporates all potential loss depending on how the redistributed capital is actually used. If it’s malinvested then X2 is no longer constrained (i.e. the loss is equal to the value of X or more), and if it’s consumed then the loss is equal to the value of X.
To put it in shorter terms, we’re not talking just about replacing the window anymore.
If this was not the case, then you could also not say that the forgone net savings of capitalists, diverted to government consumption, is capital destruction because the capitalists had not had time to invest it yet.
I don’t understand your point here. Government is consuming the savings; what’s loss is the savings themselves or whatever potential production could have come from those savings.
My intent was to show that it always amounts to loss…
But, nobody argued otherwise; the debate has really come down to hair-splitting.
Redistribution does make sense in one way. If you and your wife were having a baby, and an insurance company went up to you to suggest adding your child to a group plan. The rules of the group plan are that 20% of all earnings that your child makes will go into a fund that will help the most disadvantaged in the group. If your child is dumb or ineffective, he will be entitled to a share of other groupmember’s earnings. Assume that the government holds this contract as legitimate. This is essentially a private voluntary redistribution agreement. I’m sure that many people would enroll their children in this type of arrangement if possible. Action reveals preference.
Why do these type of contracts not currently exist is the real question.
Utilitarianism has real problems when you get into the nitty gritty of the ethical system. Who is part of the in-group in particular.
The main negative to redistribution is the incentive problems. If someone is incentivized to do nothing but sit on their butt, then most people will chose this career path.
DD5, did you see my last two posts?
You just lost me there. Your initial responses were just too weird, almost defying reason. I still don’t know what to make of them. Your last responses were better but I still don’t see what argument you’re making here.
To evaluate the impact and results of any form of violent intervention in the market, we must first understand the operation of the peaceful market economy. Then we introduce the intervention, and see what kind of results it brings about, as compared to the absence of such intervention. If you deny this method, there isn’t even a scientific way to distinguish between peaceful cooperation and violence.
So when I say that we must assess the economic implications of a particular confiscatory policy, I don’t mean that we must remove all taxes, barriers, regulations, etc… and construct a mental construct of a totally unhampered free market economy. The method implies that we simply insert and remove only the particular intervention under investigation. To explode the fallacy of the broken window, we simply make a comparison with the case of no broken window. But the window is in a real hampered market.
Now I asked you and never got a direct answer from you:
Do you consider war to be productive? Because in the course of war, there is __real productio__n with real producers, which I never denied. Such production also affects the entire price structure of the economy.
Now if your answer is NO, war is not productive economic activity, then you should simply reevaluate why you took such offense when I consider all such activity as non-productive. Sure. I examine the result from the perspective of the consumers making choices in the absence of coercion. But so does Mises.
Yes, I understand that prices convey information regarding supply and demand as it is influenced by both the public and the government. But what does this have to do with anything? I can’t say that the production of steel for bombs is unproductive because it influences prices?
Two things you are saying are contradictory. In the first paragraph you say that we always must start with a mental construct of an unhampered (peaceful) market economy (“we must first understand the operation of the peaceful market economy”), then in the second paragraph you say that you’re NOT saying that we always must start with a mental construct of an unhampered (peaceful) market economy ( “I don’t mean that we must remove all taxes, barriers, regulations, etc… and construct a mental construct of a totally unhampered free market economy”). [Insert here exasperated remarks about your alleged fundamental abandonment of all logic/reason, since that is the way you prefer to address me and Jonathan (I just don’t have time, energy, or spleen necessary to actually think such remarks up)]
Incidentally, in your first paragraph you say that starting with a peaceful market and the interventions is necessary to scientifically distinguish between peaceful cooperation and violence. That would be presupposing the definition of peace in order to scientifically discover what peace is.
Jonathan,
Let me make the problem a bit more typical and realistic.
typically, the government confiscates incomes and then spends it. Let’s say some of this spending subsidizes the production of electric cars, so this is considered an investment in capital goods.
Consumers must forgo those goods that are most urgent to them so that electric cars that consumers didn’t want are produced (or whatever part of the production that consumers didn’t approve off). The forgone consumption means curtailment of production for those goods and transfer of capital to the production of electric cars (in the form of forced savings and transfer of forgone savings).
Now here is the broken window fallacy:
The goods that consumers must forgo is the suit that the baker didn’t buy because he had to fix his window.
The purchase of factors of production for the electric cars is the money the baker had to spend on fixing the window, but instead of the consumer making the purchase for the “repair”, the government is doing it on their behalf. (obviously enough because consumers won’t break their windows on purpose).
It’s true, if the government investment is not totally squandered (as you point out), then consumers get back the equivalent of a partial suit. (or a smaller window was broken costing less money to repair). This hardly makes the example not qualify as a broken window fallacy.
Yes, I slightly changed the problem. You are describing a direct transfer of capital as if the government can just confiscate only existing capital in some way, which is not very realistic. But still, the same principle will apply. There will be a curtailment of goods that consumers will have to forgo as a result of confiscating the capital of a successful entrepreneur for the sake of the production of electric cars.
To analyze any single particular action on the market, we can isolate it and assume all other things being equal. To analyze a particular act of violence, we can construct a mental system absent violence (unhampered free market), and then just analyze that particular action under investigation. This method is equivalent to isolating that particular action in a hampered market. We don’t need to worry about the fact that there are other acts of violence occurring elsewhere in the real market. That’s what is meant by “we don’t need to remove all taxes, barriers, et…”
I don’t know what your argument is. Do you have one? You originally criticized my method, but as I pointed out, you’ve done so by what I see as an implicit attack on economics itself. I can’t read your mind. I’ve asked you a few direct questions and you have evaded them every time.
Danny, Do you have an argument to put forward?