The illogical conclusions of Elizabeth Warren

In recent days, a video of Elizabeth Warren, a Democratic candidate for the Massachusetts Senate and a law professor at Harvard, has appeared on the Internet (and especially on social networks) claiming that "there is no one in this country who gets rich on his own." The editor of The Freeman magazine, Sheldon Richman, shows in her arguments how even from the right assumptions we can come to illogical conclusions.

Elizabeth Warren, Massachusetts Senate candidate
Elizabeth Warren, Massachusetts Senate candidate

If you use social networks, you probably are they came across a video with Elizabeth Warren, a Massachusetts Senate candidate. In his commentary he says:

"There is no one in this country who gets rich on his own. No one. Did you build a factory here? Okay. But let's pour ourselves pure wine: you bring your goods to the markets on the roads that the rest of us have paid for; you hire workers for whom the rest of us have paid for education; you are safe in your factory thanks to the police, which the rest of us pay for. You don't have to worry about a bunch of robbers coming to you to take everything from your factory, you don't have to hire someone to defend you, thanks to the work the rest of us have already done. Now look, did you build a factory from which something special, amazing grew? God bless you. Enjoy it. But part of that fundamental social contract is that you will contribute part of the proceeds to the future of our children. "

Massachusetts Senate candidate in the video below, from 0:55:

This is a typical example of how you can come to invalid conclusions even with valid assumptions.

He's right about something: If you live in a society, you make money in many different forms. LanguageThe language you speak and think in is a social institution that could not exist without the presence of others. It is a habit that limits our interpersonal behavior far more than the decrees of the authorities (mistakenly called "laws"). And those few sensible ideas in these returns stem from the bottom of human habits. After all, what about money? It is also an organic social institution. Of course, today's "money" is uncovered money controlled by the government, but this system also has its foundations in the institution described by Carl Menger and Ludwig von Mises.

Social creatures

so there is no need to reject Warren's assumptions. Human beings are social creatures. We should benefit from this fact. Frédéric Bastiat he did so in his Harmony:

"Let's take a middle-class person, such as a municipal carpenter, and see what services society provides and receives from it in return. This person spends his days planning boards, making tables and sideboards; He complains about his social status, but what does he receive from society in exchange for his work? The difference is huge.

He gets dressed every day when he gets up, although he himself has not made any piece of clothing to wear. An enormous amount of work, industry, transport and ingenious inventors were needed to make this clothing available to the carpenter at all, even in its simplicity…

Furthermore, breakfast. In order for his bread to be brought every morning, the agricultural land had to be reserved and fenced for him, it had to be plowed, fertilized, planted, the crops had to be protected from thieves; a certain degree of law and order had to rule over a huge number of people; the wheat had to be harvested, crushed, kneaded and prepared; iron, steel, wood and stones had to be transformed by industry into working tools… - all things that are in themselves innumerable outputs of work, not only in space but also in time…

It is indeed impossible not to be surprised by the disproportion, indeed incomparable, that exists between satisfying the needs of society and satisfying the needs that one would acquire if one relied solely on oneself and the resources available to one. I would emphasize that in one day, that carpenter will consume more things than he would be able to create on his own in ten centuries. ”

Nothing new

Elizabeth Warren then said nothing surprising. After all, this has been a (classically) liberal view of the social order formed by the market since time immemorial. However, what should be a common observation is attributed to the wrong cause: higher taxes. This is illogical.

But before we discuss Warrena's comment, let's clarify something. In today's society, as in Bastiat's, great wealth can be created by what Franz Oppenheimer or later Albert Jay Nock called "political means." These are the ones thanks to which many traders (even those proclaiming the doctrine of the "free market") gain their wealth through state intervention, which directly or indirectly, intentionally or unintentionally, restricts entry into various sectors or limits self-employment, allows them to earn oligopolistic annuities. to the detriment of consumers and workers. This is a traditional objection of classical liberals to the connection between business and government.

But that's not what Warren meant. In that video it says nothing about the privileges that corporations gain from the state, or about those long years of interventions that the long history of subsidies shows us. All she mentioned are tax-funded roads, schools and police - three examples of services whose quality lags strongly precisely because of tax monopolistic financing. (After all, roads are a subsidy to long-distance carriers, which, however, it forgets).

There is a simple cure for ailments caused by state privileges: abolition of those privileges. However, as a true corporate socialist, she prefers further regulation, rather than simply repealing it. And as we already know from theory of public regulation by George Stigler, regulators will usually go to the hands of the regulated, or the regulated will write a regulation tailored to themselves.

Let's present the contract

“… [P] did you build a factory from which something exceptional, amazing grew? God bless you. Enjoy it. But part of that fundamental social contract is that part of the proceeds will contribute to the future of our children, "she said.

But has anyone seen this "social contract" that you commit to handing over "part of the proceeds" under threat of violence? I'm sorry, though I do not believe in open and unwritten so-called "contracts", in which every lawyer of government reads the conditions only retrospectively. Moreover, why is it not paid in advance for the production of the best and the exchange of the most valuable goods? Just as our standard of living today is the fruit of the production of previous generations, so Today's producers help raise the living standards of future generations.

In short, Warren's argument is that when everyone had to pay taxes on the provision services, thanks to which the rich could get rich, the rich should subsequently pay higher taxes. What's going on? Warren must first prove that the rich pay too little today - for what he has no proof, he only assumes that. However, this is not enough. It is also possible that provided by the state service costs too much - could we not expect it from a state-protected monopoly?

Of course, she could argue that the existence of a deficit shows that not enough money will be collected on taxes, so the richest should pay more taxes. However, this is still not a very good argument. After all, as she herself suggests, the George W. Bush administration has been marked by uncovered expenses for years. However, this sounds more like a problem of high spending than small taxes.

Solution? Reduce spending.

The original text in English can be found at The Freeman online (Elizabet Warren's Non Sequitur).


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  2. and I would also mention that the goods will pay such taxes that the whole association of incentives will not pay for a lifetime.

    but here a clear answer emerges - if we do not want to pay compulsorily for the services of the state, then let them be provided by the private sector and we pay them voluntarily.

  3. Below the original article is a great discussion with many other arguments. For example: where did the wealth that "the others" paid for come from?

  4. But mainly the manufacturer pays taxes in the same way as everyone else (VAT, excise) and therefore he also paid for travel, police and education. But in addition to that, he supplied the company with some products and jobs. None of the "others" supplied it, they just consumed it.

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