Monday, November 06, 2006

Why do we so greatly penalize the Golden Tiger who produces so much?

(Updated 11:45 p.m.)
Woods Starts Golf Course Design Business

Nov 6, 2006 (AP)— Tiger Woods has been conquering golf courses around the world. Now he's going to start building them. Following other players-turned-architects, Woods announced Monday he has formed Tiger Woods Design and will start looking for land to design golf courses.

"My goal is to provide a unique collection of amazing courses all over the world that represent what I love about golf," said Woods, who will be chairman of the company.

He did not say where his first golf course would be, although an announcement is expected by the end of the year and likely will be outside the United States.
What a player, and what a businessman. He knows how to market himself, and he deserves every penny. It's completely immoral that the government takes so much from him, especially when he provides jobs regardless of whether he saves it or spends it. On the other hand, when the government taxes him to redistribute the money, it passes it through its bureaucracy (the very epitome of deadweight loss), then spends it as unwisely as possible. Remember: bureaucrats measure success not by efficiency, but by raw numbers served. That's like McDonalds aiming for twice as many served, even if their Big Macs are of terribly quality and cause food poisoning. At least McDonalds doesn't forcibly compel you to eat there -- try refusing to be a "customer" of the IRS.

If liberals had their way, Tiger and other very wealthy individuals would be taxed even more under the socialist belief that no one should have more than anyone else. Tiger and others of great wealth would then have no incentive to produce as much, and "produce" literally means creating wealth. Wealth is not finite: wealth grows according to what each person produces, and the fact that one person earns more money than before does not deprive anyone else of the money.

Let's think of a small pre-industrial economy. Jim is a farmer, his wife Mary is a seamstress, Peter is a lumberjack, and Thomas is a fisherman. They all specialize in their own professions and trade with each other. One day, Jim decides he'll plant another acre of crops this growing season. It's still economic growth whether he sells it locally or to a neighboring village, and it encourages even more growth by encouraging the buyer to produce more himself: he might want to increase his purchasing power so he can buy more, rather than reallocating his consumer preferences. Whichever he chooses, there will be more competition among sellers, forcing them to innovate new, more efficient ways of producing.

So Jim earns more money, some of which he uses to hire newcomer Eli (that name was not picked coincidentally) to make a machine more efficient at harvesting or processing crops. Mary uses some of the extra money too, to invest in better sewing equipment. With the additional money, they can buy more wood from Peter to expand their home, and Peter can hire Eli to build him better tools. Thomas is not forgotten, because everyone else can afford to eat more fish (far tastier than the same old vegetables and bread), and Thomas can use the extra money to build a better boat and fashion better nets.

Now let's throw in government. One day, Paul, Harry, Nancy, Charlie and Hillary come onto the scene. They don't really produce much of anything, but they helped form an unnecessary government that takes money from Jim, Mary, Peter, Thomas and Eli. Then that money goes to certain friends, acquaintances and supporters (voters) of Paul, Harry, Nancy, Charlie and Hillary, especially people who go around to collect "contributions" from Jim, Mary, Peter, Thomas and Eli. Because the "collectors" have access to superior firepower and can imprison people, Jim, Mary, Peter, Thomas and Eli have no choice but to hand over half of what they produce. The money often goes to pay others to build roads and buildings that nobody would have paid for if they were paying for it themselves. These people wouldn't have made as much if they had to be worthy of their own hire, so at every election they naturally want to see Paul, Harry, Nancy, Charlie and Hillary win again.

Well, it doesn't take too long for the four hard-working people to realize, "Geez, I worked more so I can have more things that please me, but I got so little in the end because of this stupid thing called a 'higher tax bracket.' Why should I bother when my money goes to people who don't produce as much as I do?" And so they cut back on their work, because the extra income after taxes is less valuable than their free time, and government revenues fall. Then Paul, Harry, Nancy, Charlie and Hillary accuse Jim, Mary, Peter, Thomas and Eli of "not paying their fair share," and Jim, Mary, Peter, Thomas and Eli are made to "contribute" even more.

What I've described is my own expansion of Say's Law, the basis of supply-side economics: supply must come before demand, because "products must be paid for with products." Say formulated his ideas 130 years before John Maynard Keynes started us on the road to hell, and it's how an economy really works. It's all the same whether Jim plants crops or writes computer software, whether Eli builds a better crop harvester or a better C++ compiler, etc. More specifically, what I've described is capitalism. Contrary to all the socialists' malignment, capitalism does not imply "exploiting" workers. It's merely the reinvestment of profits back into the business so that it can expand. Expansion means more jobs, more production, and more prosperity.

Forget all the Keynesian tripe you've ever heard, especially Krugman's ridiculous economic model (so absurd and simplistic that if anyone else had written it, I'd have thought he had to be joking). This is the modern "economics" that Don Luskin rightfully calls a "weapon." Yes, it's very much a weapon, one used by politicians and pseudo-economists to justify the central planning of people's lives, rather than letting people make their own decisions.

Note one thing about the basic economy: there's no need for a central bank, no matter what form of money is used. None whatsoever, not even "to increase the money supply to maintain price stability." Money in any form is merely a medium of exchange, and its value is therefore purely relative. It's so relative that whether the villagers are transacting between themselves, or with another village, the participating parties are perfectly capable of figuring out any "exchange rates" by themselves. Note that I'm not arguing against a standardized currency, since government's coin can have the advantage of reducing the information cost of each transaction, but I emphasize that people should still be free to use whatever medium of exchange they want. A problem arises, though. Even if government does not have a true monopoly on currency (by prohibiting and punishing the use of any other), its illusory image of "trust" creates a huge barrier to market entry for anyone who wants to compete with government's "legal tender." Most people are familiar with the saying, "Trust is earned, not bestowed," but a central bank, as an agent of government, is viewed as implicitly trustworthy because most people don't know enough to question its powers.

So getting back to Tiger Woods, let's modernize the economy and include him. If he earns a million-plus dollars from winning a tournament, does that deprive you or me of my income? Not in the least. Tiger earns his money courtesy of tournament sponsors, who produce products that you and I buy. True to Say's Law, we work to buy those, and then more if we overtime or obtain better employment. And what does Tiger do with his money? He buys whatever he wants, which creates employment for people who build things like luxury houses and yachts (very well-paying jobs), then saves the rest. However he saves (stocks, bonds or a savings account), it's all returned to circulation in the economy. Not one dollar is lost. Based on Bastiat's description of the "broken window" fallacy and how money circulates, I term this "Bastiat's Law of the Conservation of Money."

Now Tiger Woods is lending his phenomenal skills to the construction of new golf courses, which will create even more jobs for those with suitable skills, and again not depriving anyone of a single dollar. Well, there are those who will lose: those who are uncompetitive and now won't sell as much, and who will not be lent as much. Tough luck, eh?


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