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What We Want From Our Government

May 4, 2014

I first heard about the three policies that we want from our government in one of Stephen Jay Gould’s stories, although the idea can be traced back to Plato.  I’ve been thinking about this concept for some time, and have enlarged upon it myself.  The three things are freedom, fairness, and equality.  When we first hear of these, we want all three, of course.  Who wouldn’t?  The dilemma is that we can’t have all three in full strength because they conflict with each other.

I know that these policies have a wider scope, but I’m going to restrict myself to financial examples, the same as Stephen Jay Gould did.  They are easier to understand in the financial realm.

The first policy is freedom.  It implies that we can do whatever we want.  Of course, we all agree that there are limits to freedom.  We restrain ourselves from doing anything that might harm other people, even though we are free to do so.  However, there are more limits than we might expect.  In financial terms, we are free to do whatever we want with our money, including giving it away.  This ability certainly seems reasonable.  We are free to give it away, including giving it to our children as an inheritance.  Do we realize that doing this will cause problems for other people?

The second policy is fairness.  This principle means that your wealth or income depends on your willingness to work hard.  Of course, it also depends on your knowledge, education, and experience.  This policy requires that we all start out with nothing.  If we inherit wealth from our parents, fairness comes into conflict with freedom.

One of the founders of the United States was Benjamin Franklin.  He always claimed to be a printer, a tradesman, and a self-made man.  He made his fortune through his own enterprise and initiative.  This idea became the American way: anybody can become a millionaire through their own hard work.  It’s also not realistic.  The vast majority of Americans never become millionaires.  It was not accurate even for Franklin.  He may have started out as a tradesman, but in later life he was a diplomat, an employee of the colonies.

The third policy is equality.  In financial terms, all of us should have the same wealth.  It’s a socialist principle.  Karl Marx said “From each according to his abilities; to each according to his needs”.  In its fullest form, of course, it doesn’t work.  In a lesser form, it’s essential.  Unfortunately, the principle of equality comes into conflict with the principle of fairness.

What can a government do in the face of all these conflicts?  People need all three of the policies in some proportion.  To make this compromise possible, governments must engage in redistribution of wealth.  Taxation is the way.  An inheritance tax can prevent accumulation of wealth in families to some extent.  A corporation tax will have a similar effect on wealthy companies.  Income tax is a source of funds that governments can use for redistribution.  Governments need to provide social programs to assist poor people, so that they have some of the benefits of the society in which they live.  Taxation also means that governments can fund infrastructure projects like roads and bridges that benefit everybody.  They can also provide free education.  Yes, taxation applied correctly can solve this dilemma in the best way possible.

 

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