The flow of wealth.
This post presents a philosophical idea inspired by the text of today’s Daf. The Daf is one page in the Talmud that tens of thousands of people study each day. I explain the connection to the text in a comment below. My purpose is to show that there are underlying philosophical assumptions in the Talmud that can have great significance for anybody today trying to understand our complex reality.
When we consider the distribution of resources, power, and benefits in society, two contradictory principles drive the various proposals.
One direction is the desire to be fair and equal in the distribution, thus giving all individuals within society the motivation to participate in it.
The opposing viewpoint assumes that in order to adapt, innovate, and grow, creative and ambitious individuals within that society must be given special incentives in the form of an increased allocation of resources, power, and benefits. In other words, if you can’t become much wealthier than everybody else, then you’ll just hang back and ride on the efforts of others.
The argument for radical inequality in the distribution of wealth proposes that even the poorest member of society is better off under a system that incentivizes a few outstanding individuals to make the society as a whole prosper.
The need for incentive seems to be a hard fact of human nature. The alternative, where society legislates that everybody must work hard without providing incentives, requires high levels of coercion, mostly at gunpoint. Various Communist regimes ended up murdering tens of millions of their own citizens before they realized that it couldn’t be done.
The modern solution is to tax income at progressively higher percentages as income increases but then to drop that percentage for the highest income brackets. At the other end of the scale, for the poorest, the alternatives are to work hard or face dire poverty and privation. This system was already adopted in Europe in the late Middle Ages when food productivity started rising and populations started growing. Instead of working fewer hours per person, farmers still worked the entire day and the rest faced the problem of finding jobs off the farm. This reached an extreme today where almost none of us work to produce the basic needs of living, yet many of us still have to work hard every day.
Income probably cannot be taxed any further without risking more tax evasion and killing the incentive to work hard, innovate, and take the risks needed to keep growing the economy and help science and technology progress.
Society is still faced with the same dilemma of how to balance the need for equality and fairness, with incentive and growth.
One radical proposal, that nobody can imagine trying, is to reset wealth distribution once every few years, say once per generation or two. At every reset, all the wealth of society would be redistributed, so that everybody has exactly the same share of everything. Immediately after the reset, everybody can go back to striving to accumulate as much wealth as possible. This would prevent ever-rising inequality while still always providing the incentive of trying to get rich.
Assuming that a hard reset is impractical due to the severe shock of such a sudden change, perhaps a gentler alternative is continuous resetting. Instead of a radical redistribution once in a while, wealth, but not income, would always be taxed. As an outstanding individual succeeds in causing the flow of wealth to move “uphill” towards themselves, there would always be a force that pulls the wealth back “downhill”. If an individual or family stops providing society with the benefit of growth, a slow and gradual process will eventually redistribute the concentration of wealth at that location.
Of course, this idea would never work. Why on Earth would the rich and powerful agree to such a scheme?