Saturday, August 23, 2008

Defining "Fair"

(via ASI):

But while the prime minister appears to believe that expanding the state is the key to creating a fairer society, Osborne had a very different take on the subject. He said there were three elements to 'fairness':
  • First of all, people should be properly rewarded for their efforts. That means free markets with lower and fairer taxes.
  • Secondly, fairness requires equality of opportunity. That means extending choice in education and healthcare to everyone – not just the wealthy – and reforming welfare so that it empowers people to get back to work, rather trapping them in poverty.
  • Thirdly, the current generation should not make future generations pay for their mistakes. And that means establishing a long-term price for carbon emissions, and coming up with a new fiscal framework to scale-back government borrowing.
Makes sense. By invoking the idea of "class warfare" some politicians want us to believe that equality of outcomes is "fair" by playing to greed and envy of the electorate. For some it's become more about robbing the rich to pay for the excesses of politicians and less about the poor. In the US, the rich already pay a disproportionate amount in taxes: "The richest 1% of Americans now pays 35% of all income taxes. The top 10% pay more taxes than the bottom 60%."

In market-based economies, wealth is almost always a direct result of innovation. The idea that the rich owe society ignores the reality that they have already given far more than they've received. It seems somewhat idiotic as a matter of policy that you would penalize the people who most benefit society. It's the equality of opportunity and ensuring that incentives to innovate continue to exist that matters.

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