Difference between revisions of "Notes:BC1.EF.The Secret of Enterprise"

Revision as of 15:53, 22 November 2014

An outline of the ideas in the prologue of Gilder's 2012 edition of Wealth and Poverty^[1].

Wealth and Poverty was first published in 1981.

In 1981 "socialism was dead" but few stepped up to hail capitalism as triumphant. Most seemed to view capitalism as faute de mieux that was saved by charities and regulations and the New Deal. But capitalism is

"the supreme expression of human creativity and freedom, an economy of mind overcoming the constraints of material power."

"a dynamic force of constant creation, pushing human enterprise down spirals of declining costs and greater abundance"

Supply side vs. incentive-reward.

In the supply side model, taxes are "the price of earning and investing income - that yielded increasing revenues as the rates were reduced." A controversial idea.

• Some accept the behavioral model of stimulus and response, in which lower rates are the stimulus of reward for more work and risk taking which yield more taxes.

Gilder writes that a successful economy is driven more by the "unimpeded flow of information. . . Increasing revenues come not from a mere scheme of carrots and sticks but from the development and application of productive knowledge."

• Greed vs. information and knowledge

The acceptance of stimulus-response encourages the idea that capitalism is a greed based system.

On the contrary - greed "prompts capitalists to seek government guarantees and subsidies that denature and stultify the works of entrepreneurs. Greed . . leads as by an invisible hand to an ever growing welfare state - to socialism."

It is the expansion of information and knowledge that generates growth and progress.

It is a competitive pursuit of knowledge. (CW emphasis)

• Capitalism is not a zero-sum dog-eat-dog game.

The winners teach the losers how to win through the spread of information.

The success of some is not at the expense of others. Free economies "climb spirals of mutual gain and learning."

Capitalism's moral center is a golden rule of enterprise: The good fortune of others is also your own.

"Not only does capitalism excel all other systems in the creation of wealth and transcendence of poverty, it also favors and empowers a moral order."

But much of the world indicts capitalism as a zero-sum game in which any gains by the rich come at the expense of the poor - that they are somehow extracted from the poor.

"Aero-sum inequality and exploitation continue to preoccupy the media. Congress remains enthralled with static accounting rules that assume tax-rate reductions will not alter economic behavior. In this model, the only way to expand tax receipts is to raise rates on the "rich."

• Altruism: capitalism favors altruism, an orientation toward the needs of others (a slight warping of the meaning of the word which also means selflessness)

Quotes Richard Posner, a professor of law and economics at the University of Chicago. "Because the individual cannot prosper in a market economy without understanding and appealing to the needs and wants of others, and because the cultivation of altruism promotes the effective operation of markets, the market economy . . . also fosters empathy and benevolence, yet without destroying individuality."

The ranks of supply siders have thinned. A number of erstwhile allies now insist that they never claimed that lower tax rates lead to higher revenues.

• The focus on the budget is misguided:

"Shrink the budget" is now the conservative mandate for prosperity. "Keep what you earn" is the moral foundation. The focus is on the downside of deficits as the deterrent to abundance and creativity.

Still, no one has the political will to shrink the budget except to cut defense. They seek a balanced budget amendment as the fix.

But revenue to fund progressive-liberal can be extracted in ways less obvious than taxes - with mandates and regulations - that are even more demoralizing to enterprise. These can take the form of mandating private spending or offering a tax rebate - example, the mandate to suppress CO2.

This focus sees budgetary issues as acute in the future

which "implies that liberal policies are not already infecting our economy with a multiple sclerosis of tax and regulatory curbs, destroying jobs and families with webs of rules and pettifoggery, price controls, skewed social policies, and litigation. A budgetary focus obscures the continuing devastation of vast expanses of our environment with archaic windmills, ethanol farms, and subsidized Druidical sun-henges. It downplays the continuing degratdation of schools by agitprop campaigns and Ponzi schemes of self-esteem. It diverts attention from the stultification of our health care systems by misconceived insurance fragmented through fifty states and denatured by coverage of every human frailty and daily need (rendering it not insurance at all but merely government overreach)."

"Most of all, the budgetary preoccupation obscures the ongoing assault on the families of the poor, ensnaring them in a welfare state for women and children and a police state for two generations of black boys. Some seventy programs annually dispense close to $900 billion mostly to single-parent families totally incapable of raising boys."

1. ↑ Gilder, George. Wealth and Poverty, A New Edition for the Twenty-First Century. Washington, DC. Regnery Publishing. 2012