I created the 8th Theorem of Government because it’s important to distinguish between people who want to help the poor and people who want to punish the rich.
The former group has good motives while the latter group has ignoble motivations.
- Envy (common among the leftist intelligentsia)
- Public choice (common among leftist politicians)
- Zero-sum illiteracy (common among ordinary leftists)
All three motives are unseemly, though the third one is somewhat forgivable. Many people simply don’t understand that it’s possible for everyone to get richer at the same time.
For today’s column, I want to focus on the first group.
Many of these people think societies should be judged by their “Gini Coefficients,” sometimes known as the “Gini Index.” Here’s a simple definition.
I think the Gini Coefficient is irrelevant for two reasons.
First, “super entrepreneurs” make the rest of us better off. I want to live in a nation with lots of people like Elon Musk, Warren Buffett (notwithstanding his fiscal illiteracy), Bill Gates, and Steve Jobs. They get rich, but the rest of us get most of the benefit.
Second, the Gini Index doesn’t distinguish between honestly earned wealth and getting loot via cronyism. Some developing nations have lots of inequality, for instance, because the elite use the coercive power of government to pillage ordinary people.
When I explain this issue in speeches, I often cite two real-world examples.
- China has much more income inequality today than 50 years ago presumably in mostly because of partial economic liberalization. Yet every single income group is far richer today and serious poverty has largely disappeared. Is that a bad outcome?
- Sweden has a lower Gini Coefficient than the United States, which the left applauds. Yet incomes for the bottom two income deciles in the two nations are similar while Americans in the other eight deciles have much higher incomes. Which nation is better off?
I want to close today’s column with a sarcastic tweet that makes a very serious point. As I’ve written, successful people are escaping California and Washington because of class-warfare taxation.
By definition, that will result in lower Gini Coefficients, which our friends on the left favor.
Will this make those states happier? More successful?
P.S. I shared a satirical column in 2015 that made a very similar point. The moral of the story is that class warfare is the wrong approach.