Many of you have written to me and asked about my specific economic and political beliefs since I have a very strong tendency to play Devil’s Advocate, often writing about topics with the goal of getting you to think for yourself and make up your own mind based upon the data. It’s a common enough request that I thought it fair to identify seven, core, fundamental beliefs I hold that would guide me if I were given absolute power to construct an economic system.
This worldview was created over the past 15 years as I studied world, political, economic, and financial market history, psychology, biology, philosophy, and ethics. It errs heavily on the side of individual freedom with a core tenant that society should invest in making equality of opportunity available to all, including by providing a good educational framework so that all children are given access to the job market and upward mobility regardless of the socioeconomic status of their parents. Based upon the historical evidence and human nature, I believe that it is the fairest system possible with the highest probability of resulting in the greatest aggregate standard of living for the most people, while minimizing disenfranchisement.
Joshua Kennon’s Seven Laws of Fair Economics
Rule #1: In a free and just society, if a man wants something, he must either create it himself or exchange with other people for something they desire or need. Upon reaching adulthood, no man is entitled to anything but freedom over the body and mind God gave him.
Rule #2: How, and where, money accumulates throughout a free civilization represents what the people actually value most, not what the elite thinks they should desire. Therefore, a man should be free to determine how his own money and time is allocated, even if that means making sub-optimal decisions that result in his ruin or death.
Rule #3: No man has the right to outsource his costs while in-sourcing his profits. This is not capitalism. This is theft. For example, buying a piece of land and destroying the environment is effectively forcing the next generation and society as a whole to pick up a portion of your operating costs.
Rule #4: Beyond a basic standard of living, all income should be taxed equally and fairly regardless of source at a low, fixed rate. This ensures that the poor do not suffer under the burden of taxes they cannot afford and that successful enterprising individuals who work in productive fields such as engineering, manufacturing, and medicine don’t pay a higher tax rate than those who work in support industries such as banking, money management, and private equity. It also removes the possibility of lobbyists negotiating special tax loopholes to lower the effective rate for their industry or constituency.
Rule #5: The total amount of wealth inequality in a society is not nearly as important as the standard of living experienced by the majority of families, provided there are electoral protections against undue influence of capital on politicians. Our measures should be absolute not relative. It is our responsibility to find ways so that each successive generation lives better in real, inflation-adjusted terms, than their parents did. For example, we should consider the 20th century United States, during which wealth inequality exploded but lifespans increased and the standard of living for the average man rose 600%, an enormous success.
Rule #6: The primary roles of government economic policy should be designed to level the playing field not the final outcome. Policies should include:
- Maintaining a stable currency and full employment.
- Building bridges of upward social mobility that make it possible to move beyond the class into which you were born.
- Creating and maintaining escape, or “game over”, mechanisms such as fair bankruptcy laws, that make it possible to start over in the event of poor decisions or bad luck.
- Rewarding and incentivizing capital formation and accumulation by industrious and entrepreneurial individuals so that rags-to-riches stories are possible.
- Creating and maintaining mechanisms that prevent the accumulation of wealth in the hands of those who did not earn it, avoiding a modern day manifestation of the feudal system that existed during the European Dark Ages.
- Preventing price fixing and unfair barriers to market by those in monopoly positions.
- Establishing an education system that provides literacy and basic job skills as a fundamental human right for all children regardless of the socioeconomic background of parents.
- Enabling open and fair free trade between any two consenting parties.
- Protecting the individual liberty of all people regardless of age, race, political affiliation, sexual orientation, gender, creed, nationality, and family status.
- Ensuring equal pay for equal work.
- Protecting against workplace abuses that violate the human rights of those who are least able to protect themselves due to economic vulnerability.
- Enacting usury laws, such as the ones that were in force in the United States prior to the 1980’s, that limit the maximum interest rate charged to consumers to a multiple of the prime rate.
- Regulating financial institutions just like electric utilities, water utilities, and telecommunication utilities.
Rule #7: No single institution should be allowed to grow to be so complex or vital that it is “too big to fail”.
In essence, were I to create a system, it would be one that provided the opportunity and upward mobility for those who were willing to better themselves, learn new skills, and live within their means. It would not guarantee success but it would guarantee the opportunity for success. It would make sure that most of society’s rewards flowed to those who earned and deserved them, getting constantly recycled so it did not amass in the hands of a reincarnated Aristocracy determined solely by birth or credentials. It would be a system that protected the poor and asked virtually nothing of them in terms of tax revenue. You’d still have some folks with $50 million in a portfolio and others with only $5 in the bank but as long as the ladders of social mobility existed and remained open to all who wanted to take advantage of them, this would be a tolerable, and even desirable, situation.
Image © Thinkstock