Grade A Anti-Randian Rant

[Executive Sadman]

So, in summation, capitalism is bad, but everything else is worse.

Didnt we have this debate in the 90s, 80s, 70s, 60s....

Nothing ive seen in the last ten years has changed that.

[Hail the Tripod]

very few people have actually read Atlas Shrugged

Well it's not exactly the most gripping story ever told. It's been on my bookshelf for quite a few years now and I've never got past halfway.

[dissident junk]

People work hard and innovate because they want to be wealthy

If the state then takes all their income they simply don't bother, unless you hold a gun to their heads.

This is why all states where income is claimed by the state, are police states which always end in murder by the state and total economic failure.

I won't bother to list any of the numerous examples of this in the 20th Century and it is still happening now in countries like North Korean and Zimbabwe.

I am not sure it is quite so simple. I think many people innovate for far more complex and deeper personal reasons that just the desire for wealth; I believe humans have an innate desire to create, produce and influence their environments, to have something to point to and say "I did that", or "I made that." Often, great innovations can be more fueled out of an obsession about something rather than a desire for money.

Indeed, research suggests that it is very difficult to achieve a goal if your primary reason for doing so is just money or fame. You need something a lot deeper: that doing something gives you a sense of autonomy, competency and relatedness.

I think the tax aspect is interesting because I ain't so sure it is about tax per se, but rather about the necessity for human actions to have consequences in order for humans to feel they are having some impact on their life or surroundings. Tax increases remove an aspect of this. You work and work, but your salary starts to decline in terms of purchasing power, for example. If you don't replace this slide in some other way, I think the human mind can get very disheartened and kinda negate itself.

I read a very interesting thing about North Korea, about some event that occurred in the noughties where the peasants lost all of their savings, money they had saved bit by bit for years. I can't remember what caused it, but I do remember that there were reports of significant numbers of suicides in the aftermath. People have to feel that their work means something, changes something, alters something. For those peasants, it was the fact of their savings. And when they were wiped out, there was no strength there to carry on.

[dryrot]

Hi

back to Rand: and excellent critique here: http://www.stonekettle.com/2011/11/who-is-john-galt-that-was-bumper.html

Rand writes bad science fiction: OK if you like that sort of thing

"The simple truth of the matter is that Rand’s economic theories are brilliant because Rand wrote the story that way. Just like Jerry Pournelle’s ultra right wing military strategy is always successful in the Falkenberg series or his laissez-faire libertarianism and ad hoc free market worked perfectly for the Rimrats in Birth of Fire. Just like Kim Stanley Robinson’s Eco-economics worked so elegantly and successfully in Blue Mars. And both Robinson and Pournelle spent a hell of a lot more time and effort designing their respective economies than Rand ever did. When you control the story, of course your economic system works brilliantly"

[Austin Allegro]

Hi

back to Rand: and excellent critique here: http://www.stonekettle.com/2011/11/who-is-john-galt-that-was-bumper.html

Rand writes bad science fiction: OK if you like that sort of thing

"The simple truth of the matter is that Rand’s economic theories are brilliant because Rand wrote the story that way. Just like Jerry Pournelle’s ultra right wing military strategy is always successful in the Falkenberg series or his laissez-faire libertarianism and ad hoc free market worked perfectly for the Rimrats in Birth of Fire. Just like Kim Stanley Robinson’s Eco-economics worked so elegantly and successfully in Blue Mars. And both Robinson and Pournelle spent a hell of a lot more time and effort designing their respective economies than Rand ever did. When you control the story, of course your economic system works brilliantly"

I think Rand comes in for a lot of criticism because she's a defector on two counts: one, from the Soviet Union, and two, from the stranglehold of liberal/left dogma. If you are an 'intellectual' writer but don't hold with the orthodox leftist/Guardianista view of the world, you will make a lot of enemies.

Personally though I think she's just not a very good writer. Some good ideas, but poor execution - overblown rants and utterly humourless. If she had been tempered by a little of the humour of Kingsley Amis or the moderation of Orwell, she might be a good 'unorthodox' writer.

[wonderpup]

What the guy can't understand is the people at the top get paid more because they are harder to replace.

I agree it would be hard to match the sheer incompetence of a guy like Fred Goodwin or Dick Fuld- guys like these don't grow on trees.

In fact as we cast our eyes over the landscape of failed leadership at almost every level of our society it's hard to disagree with your claims- where would we go to find such a cast of greedy, incompetent ,arrogant morons like these?

The problem with your 'talent rises to the top' theory is the reality that those actually at the top seem to include some spectacularly stupid people- so there must be some other factor that allowed them to rise- any idea what that might be?

[Traktion]

I am not sure it is quite so simple. I think many people innovate for far more complex and deeper personal reasons that just the desire for wealth; I believe humans have an innate desire to create, produce and influence their environments, to have something to point to and say "I did that", or "I made that." Often, great innovations can be more fueled out of an obsession about something rather than a desire for money.

Indeed, research suggests that it is very difficult to achieve a goal if your primary reason for doing so is just money or fame. You need something a lot deeper: that doing something gives you a sense of autonomy, competency and relatedness.

I think the tax aspect is interesting because I ain't so sure it is about tax per se, but rather about the necessity for human actions to have consequences in order for humans to feel they are having some impact on their life or surroundings. Tax increases remove an aspect of this. You work and work, but your salary starts to decline in terms of purchasing power, for example. If you don't replace this slide in some other way, I think the human mind can get very disheartened and kinda negate itself.

I read a very interesting thing about North Korea, about some event that occurred in the noughties where the peasants lost all of their savings, money they had saved bit by bit for years. I can't remember what caused it, but I do remember that there were reports of significant numbers of suicides in the aftermath. People have to feel that their work means something, changes something, alters something. For those peasants, it was the fact of their savings. And when they were wiped out, there was no strength there to carry on.

[erranta]

A guy has emailed James Fallows threatening to go Galt if Obama wins. Here is one of the responses from Fallows' readers

http://www.theatlant...es-back/264588/

He forgot a very important one - people that keep the rich safe through bent laws in their favour and order (you know-plebs)

Just like our knobs got hold of their wealth through Henry 8th burning down monastries, killing defenceless monks and stealing all their 'freely donated' willed lands - carving the lands up between his favorites (huge 'benefits')

(majority grew herbal medicine plants in gardens & operated as hospitals for those who coudn't afford the apothcary - cos he had priced himself out of ordinary people's pockets (sounds familiar)) Another 'familiar' was Dr "scrying" Nostradamus of the occitan! Mars-eilles etc Nettles-ham 'MARS' altar druidry in LINcs

(HOO beat each other with 'Nettles' during initiation ceremonies?)

Also by starving defenceless country people (UK majority at the time) out of their homes and forced to abandon their land/commons etc through extortion, blocking of centries old rights of way and using hired thugs - then stealing the land after they were forced into the towns

Edited November 6, 2012 by erranta

[Executive Sadman]

Did i miss something?

All that video said, in 10 minutes, is that people have hobbies...

OK.

[Traktion]

Did i miss something?

All that video said, in 10 minutes, is that people have hobbies...

OK.

I guess so!

[Guest_GradualCringe_*]

paid for failure...exactly. And where is this "responsibilty?"...what is the consequence of their actions...for them?

In most cases, its a parachute...golden....

A good start would be to end limited liability.

[Guest_GradualCringe_*]

IIRC the maximum income rate in the US is something of the order of 36%. Also remember that we are talking about increasing tax on income over 250k. Personally I think if people feel paying 40% odd on earnings over 250k is somehow incredibly objectionable, then frankly that country is definitely better off if they do one.

I'd just like to say I agree with everything you have written in this thread and it is not often I get to say that.

I disagree:

The Mellon Plan:

Mellon came into office with a goal of reducing the huge federal debt from World War I. To do this, he needed to increase the federal revenue and cut spending. He believed that if the tax rates were too high, then the people would try to avoid paying them. He observed that as tax rates had increased during the first part of the 20th century, investors moved to avoid the highest rates—by choosing tax-free municipal bonds, for instance. As Mellon wrote in 1924:[4]

The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.

If the rates were set more reasonably, taxpayers would have less incentive to avoid paying. His controversial theory was that by lowering the tax rates across the board, he could increase the overall tax revenue.

Andrew Mellon's plan had four main points:

- Cut the top income tax rate from 77 to 24 percent - predicting that large fortunes would be put back into the economy.

- Cut taxes on low incomes from 4 to 1/2 percent - tax policy "must lessen, so far as possible, the burden of taxation on those least able to bear it."

- Reduce the Federal Estate tax - large income taxes tempted the wealthy to shift their fortunes into tax-exempt shelters.

- Efficiency in government - lower tax rates meant few tax returns to process by few government workers, cutting the actual size of paper bills to fit into wallets saved expenses in paper and ink.

Mellon believed that the income tax should remain progressive, but with lower rates than those enacted during World War I. He thought that the top income earners would only willingly pay their taxes if rates were 25% or lower. Mellon proposed tax rate cuts, which Congress enacted in the Revenue Acts of 1921, 1924, and 1926. The top marginal tax rate was cut from 73% to 58% in 1922, 50% in 1923, 46% in 1924, 25% in 1925, and 24% in 1929. Rates in lower brackets were also cut substantially, relieving burdens on the middle-class, working-class, and poor households.

By 1926 65% of the income tax revenue came from incomes $300,000 and higher, when five years prior, less than 20% did. During this same period, the overall tax burden on those that earned less than $10,000 dropped from $155 million to $32.5 million.[5]

Mellon also championed preferential treatment for "earned" income relative to "unearned" income. As he argued in his 1924 book, Taxation: The People's Business[6]

The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mettle and physical energy and the people whose income is derived from investments. Such a distinction would mean much to millions of American workers and would be an added inspiration to the man who must provide a competence during his few productive years to care for himself and his family when his earnings capacity is at an end.

Mellon's policies helped reduce the overall public debt (the national debt skyrocketed from $1.5 billion in 1916 to $24 billion in 1919 because of World War I obligations) from $33 billion in 1919 to about $16 billion in 1929 [7], but then the Depression caused it to rise again because of reduced revenue and increasing spending. The top tax rate went to 80% by 1935 and the federal government increased excise taxes in an attempt to make up for the lost revenue.

[alexw]

What the guy can't understand is the people at the top get paid more because they are harder to replace. The man that pumps your gas or works the mines are 10 a penny. It all comes down to supply and demand. Everybody is not equall economicly.

Wow, you really do believe this corporate sponsored MSM drivel don't you?

Fact of the matter when such things have been properly examined, there is nil or next to nil correlation between performance/ability (the reason they would be hard to replace) and pay. Study after study after study has found exactly this. The evidence is so overwhelming it's irrefutable, here's some example links.

http://jom.sagepub.com/content/26/2/301.short "firm performance accounts for less than 5% of the variance (in ceo pay)"

http://online.wsj.com/public/resources/documents/CEOperformance122509.pdf "firms that pay their CEOs in the top ten percent of pay earn negative abnormal returns over the next five years of approximately -13%."

http://www.economist.com/blogs/graphicdetail/2012/02/focus-0 "Currently, of the largest companies in America (those in the S&P 100), CEO pay has no correlation with either performance or market capitalisation."

http://oxrep.oxfordjournals.org/content/21/2/283.short "Had the relationship of compensation to size, performance, and industry classification remained the same in 2003 as it was in 1993, mean compensation in 2003 would have been only about half of its actual size."

I could go on and on but i think you get the picture.

The real reason CEO's are paid what they are paid is due to corporate capture - executives deciding other executives pay in a nice jolly reach around, with no input from the real owners of the shares and all waved through by you'll never guess who - more executives (this time of the investment industry).

Edited November 6, 2012 by alexw

[alexw]

I disagree:

Hmm so your argument is based on taxation changes that just precedes the great depression. It should kinda be obvious that tax income will rise in a bubble with little relevance to the actual tax rates. That he cut tax rates and tax income went up isn't because of the tax cuts but because of the debt boom that shortly thereafter went bust. There is also the argument that lowering tax rates to the extent he did for the wealthy helped cause the great depression. Their after tax incomes tripled (or more) after his tax cuts, and all that surplus income then went seeking a return inflating and feeding in to the bubble.

You really really didn't choose the best example for the argument your trying to make....

[doomed]

Wow, you really do believe this corporate sponsored MSM drivel don't you?

Fact of the matter when such things have been properly examined, there is nil or next to nil correlation between performance/ability (the reason they would be hard to replace) and pay. Study after study after study has found exactly this. The evidence is so overwhelming it's irrefutable, here's some example links.

http://jom.sagepub.com/content/26/2/301.short "firm performance accounts for less than 5% of the variance (in ceo pay)"

http://online.wsj.com/public/resources/documents/CEOperformance122509.pdf "firms that pay their CEOs in the top ten percent of pay earn negative abnormal returns over the next five years of approximately -13%."

http://www.economist.com/blogs/graphicdetail/2012/02/focus-0 "Currently, of the largest companies in America (those in the S&P 100), CEO pay has no correlation with either performance or market capitalisation."

http://oxrep.oxfordjournals.org/content/21/2/283.short "Had the relationship of compensation to size, performance, and industry classification remained the same in 2003 as it was in 1993, mean compensation in 2003 would have been only about half of its actual size."

I could go on and on but i think you get the picture.

The real reason CEO's are paid what they are paid is due to corporate capture - executives deciding other executives pay in a nice jolly reach around, with no input from the real owners of the shares and all waved through by you'll never guess who - more executives (this time of the investment industry).

When a company is looking for a new CEO what do you think they look for? Do you think they just pull the name out a hat?

Or they might look for people with prior achievments that amount to more than pumping gas.

[alexw]

When a company is looking for a new CEO what do you think they look for? Do you think they just pull the name out a hat?

Or they might look for people with prior achievments that amount to more than pumping gas.

Bravo!!! This is exactly what they are doing, you do get it after all!!

Given the proven zero correlation between pay and performance, what they are doing is in essence taking a hat stuffed full of other executives names and pulling one out at random. You can liken it to the way executives currently jump from industry to industry parachuted in to high paying positions in sectors they know zero about. Look at Andy Hornby and how he's moved from completely disparate industry to disparate industry. They might as well have found some middling level pen pusher for 100k a year and in all probability found someone who would have done a better job.

http://en.wikipedia.org/wiki/Andy_Hornby

But back to the hat example - if they actually did just use a hat there would be no difference to what we currently see in corporate performance, and it would save shareholders and society a heck of a lot of money.

Edited November 6, 2012 by alexw

[shipbuilder]

Ironically both Rand and Marx made the same point - that when you take too much of the fruits of people's labour from them, when you organise to leach off the productive, then the workers will eventually give up.

Unfortunately we still get arguments as to who was right.

[Guest_GradualCringe_*]

Hmm so your argument is based on taxation changes that just precedes the great depression. It should kinda be obvious that tax income will rise in a bubble with little relevance to the actual tax rates. That he cut tax rates and tax income went up isn't because of the tax cuts but because of the debt boom that shortly thereafter went bust. There is also the argument that lowering tax rates to the extent he did for the wealthy helped cause the great depression. Their after tax incomes tripled (or more) after his tax cuts, and all that surplus income then went seeking a return inflating and feeding in to the bubble.

You really really didn't choose the best example for the argument your trying to make....

Please read the entire quote.

Debts and business cycles occur regardless of income tax rates. Are you seriously suggesting that governments are capable of controlling such things?

Further "The Great Depression" wouldn't have occurred if politicians had allowed the markets to clear, as in 1921. The terms "recession" and "depression" are relatively modern terms, in the past before governments massively intereferred in such things they were called "panics" because the clearing process and adjustment of prices (when markets were allowed to work), was short lived process.

Another important point I'm trying to make is that low tax rates, rather than somehow depriving, hurting, or stealing from poor people (something that people on your side of the debate seem to assert), actually resulted in the burden of tax income falling on the very richest, I'll re-iterate this part:

- Cut the top income tax rate from 77 to 24 percent - predicting that large fortunes would be put back into the economy.

- Cut taxes on low incomes from 4 to 1/2 percent - tax policy "must lessen, so far as possible, the burden of taxation on those least able to bear it."

- Reduce the Federal Estate tax - large income taxes tempted the wealthy to shift their fortunes into tax-exempt shelters.

- Efficiency in government - lower tax rates meant few tax returns to process by few government workers, cutting the actual size of paper bills to fit into wallets saved expenses in paper and ink.

Mellon believed that the income tax should remain progressive, but with lower rates than those enacted during World War I. He thought that the top income earners would only willingly pay their taxes if rates were 25% or lower. Mellon proposed tax rate cuts, which Congress enacted in the Revenue Acts of 1921, 1924, and 1926. The top marginal tax rate was cut from 73% to 58% in 1922, 50% in 1923, 46% in 1924, 25% in 1925, and 24% in 1929. Rates in lower brackets were also cut substantially, relieving burdens on the middle-class, working-class, and poor households.

By 1926 65% of the income tax revenue came from incomes $300,000 and higher, when five years prior, less than 20% did. During this same period, the overall tax burden on those that earned less than $10,000 dropped from $155 million to $32.5 million.[5]

[doomed]

Bravo!!! This is exactly what they are doing, you do get it after all!!

Given the proven zero correlation between pay and performance, what they are doing is in essence taking a hat stuffed full of other executives names and pulling one out at random. You can liken it to the way executives currently jump from industry to industry parachuted in to high paying positions in sectors they know zero about. Look at Andy Hornby and how he's moved from completely disparate industry to disparate industry. They might as well have found some middling level pen pusher for 100k a year and in all probability found someone who would have done a better job.

http://en.wikipedia.org/wiki/Andy_Hornby

But back to the hat example - if they actually did just use a hat there would be no difference to what we currently see in corporate performance, and it would save shareholders and society a heck of a lot of money.

I give up. You are deluded.

[Guest_GradualCringe_*]

Bravo!!! This is exactly what they are doing, you do get it after all!!

Given the proven zero correlation between pay and performance, what they are doing is in essence taking a hat stuffed full of other executives names and pulling one out at random. You can liken it to the way executives currently jump from industry to industry parachuted in to high paying positions in sectors they know zero about. Look at Andy Hornby and how he's moved from completely disparate industry to disparate industry. They might as well have found some middling level pen pusher for 100k a year and in all probability found someone who would have done a better job.

http://en.wikipedia.org/wiki/Andy_Hornby

But back to the hat example - if they actually did just use a hat there would be no difference to what we currently see in corporate performance, and it would save shareholders and society a heck of a lot of money.

I hear your objection to the behaviour of some high level executives in large companies. Who do you think should pick who runs a company? And why would they necessarily be better at it?

In the financial sector the behaviour of executives is particularly egregious, I agree. However, bailouts, boondoggles, subsidies and special favours from the government allow them to continue, without these (and the abolition of limited liability) we wouldn't be discussing this as such people would be joining the dole queue, with an army of creditors chasing them for every penny they might of made in the short term from their profligate business decisions.

[alexw]

Please read the entire quote.

Debts and business cycles occur regardless of income tax rates. Are you seriously suggesting that governments are capable of controlling such things?

Further "The Great Depression" wouldn't have occurred if politicians had allowed the markets to clear, as in 1921. The terms "recession" and "depression" are relatively modern terms, in the past before governments massively intereferred in such things they were called "panics" because the clearing process and adjustment of prices (when markets were allowed to work), was short lived process.

Another important point I'm trying to make is that low tax rates, rather than somehow depriving, hurting, or stealing from poor people (something that people on your side of the debate seem to assert), actually resulted in the burden of tax income falling on the very richest, I'll re-iterate this part:

They can't control such things but they can enhance or moderate them. There is a serious economic argument to be made that lower tax rates on the wealthy tends to make booms (and hence the following busts) greater. There is a group of economists examining this link currently.

As for the depression quickly ending as in 1921 this is an extremely dubious assertion. Following the bust the then president followed policies of cutting spending and balancing the books. It was only four years later when Roosevelt came in that policies changed, and that was because it was clear that the current economic medicine was having zero effect in effecting a recovery.

[alexw]

I hear your objection to the behaviour of some high level executives in large companies. Who do you think should pick who runs a company? And why would they necessarily be better at it?

In the financial sector the behaviour of executives is particularly egregious, I agree. However, bailouts, boondoggles, subsidies and special favours from the government allow them to continue, without these (and the abolition of limited liability) we wouldn't be discussing this as such people would be joining the dole queue, with an army of creditors chasing them for every penny they might of made in the short term from their profligate business decisions.

The issue is that the individuals who choose corporate executives and decide their pay have little to no incentive to make the best decision because it's not their money that is paid out if a bad decision is made. They might at worst loose their job but they will be picked up by some other corporate board looking for another mutual back scratcher, who will carry on the long established tradition of driving up each others pay.

My thoughts on this is that the setting of pay and confirmation of executive appointments should be made by the actual shareholders and investors into pension funds. Simply put when a board proposes a pay package or appointment, the companies which manage money on the behalf of others electronically canvas some % their investors on which way to vote providing all the necessary and relevant information in an understandable one page summary. For example total possible maximum renumeration, numeration if past 5 years performance is repeated, and total minimum possible renumeration. On new appointments, their previous roles, pay and performance of the division/company they oversaw.

Thus its the people who's money is at stake who make the decision, and it's a no-brainer as to why this would provide the correct incentives for them to be better at it.

Edited November 6, 2012 by alexw

[alexw]

I give up. You are deluded.

Well I just don't get your point. You say they look for someone who has prior achievements. But they don't, their criteria is pretty much find someone who has worked as an executive somewhere else - somewhere else being another large corporate. That's it.

If it was based on achievements then what you'd have is extremely high turnover in executives, as those that just muddled through or did not beat the sector average were discarded, and up and coming high flyers from smaller companies or within the corporate structure were promoted upwards. But this almost never happens. Its a smallish group of executives parachuted from one company to another, at which they do mediocre management taking for the privilege 10's of millions of pounds of other peoples money over their corporate lifetimes. As a consequence using a hat with executive names in it is just a good a method as is currently used.

[Guest_GradualCringe_*]

They can't control such things but they can enhance or moderate them. There is a serious economic argument to be made that lower tax rates on the wealthy tends to make booms (and hence the following busts) greater. There is a group of economists examining this link currently.

As for the depression quickly ending as in 1921 this is an extremely dubious assertion. Following the bust the then president followed policies of cutting spending and balancing the books. It was only four years later when Roosevelt came in that policies changed, and that was because it was clear that the current economic medicine was having zero effect in effecting a recovery.

The current crisis is not exactly conducive to your current argument. Tax rates are higher and governments have never been more powerful, and they have done little to ameliorate peoples' desire to take on debts in the run upto the crisis.

As for Hoover running balanced budgets and free markets and for Roosevelt to save the day 4 years later, is patently untrue. Hoover initiated public works programmes in 1929 (I don't have the numbers to hand but I'll dig them out), and engaged in manipulation of the wheat and cotton markets through the FFB (Federal Farm Board). The 1930 Smooth-Hawley Tariff decimated US exports when the rest of the world retaliated with similar tariffs (U.S. exports to Europe decreased from $2,341 million to $784 million. Overall, world trade decreased by some 66% between 1929 and 1934), further Hoover ran a budget deficit of $2.1 billion in 1931, and a deficit of $1.7 billion in 1932.

[Guest_GradualCringe_*]

The issue is that the individuals who choose corporate executives and decide their pay have little to no incentive to make the best decision because it's not their money that is paid out if a bad decision is made.

Precisely why I said "end limited liability, and tax payer bail outs", which you seem to have ignored.

There is no need for convulted regulation.