Tuesday, December 9, 2008

Have some pie

I recently heard someone talking about economics, taxation, wealth redistribution, et cetera... She said that some people have too big a slice of the pie. I posit that anyone who ever uses the phrase "their piece of the pie" in reference to economics, does not actually understand money at all. Pie is fundamentally different than money. Let me illustrate. Has anyone ever offered you some used pie? If someone came to you and said that they had some pie yesterday, passed it through their digestive tract, deposited what remained back in the original pie tin, and saved it just for you, would you find that offer offensive? Disgusting? More than a little bit odd? Perhaps all of the above?

Now, for contrast, say that you were in a job interview. The company obviously liked you, and was attempting to woo you by extolling upon their own virtues. What if they told you that, while they may not pay quite as much as some other companies, their pay was of higher quality, because unlike those other companies that pay their employees with "used" money, they print their money up fresh every payday so that their employees only get brand new never-before-used money. Would your first instinct be to take that job on the spot, or to perhaps call the secret service?

Pie and money are fundamentally different. When you phrase things in terms of a piece of the pie, it makes people think that there's $14 Trillion dollars out there in the economy, and if someone makes a billion of it, there's less for everyone else, just like if Alice, Bob, Carol, and Dave are sharing some pie, and Alice takes a huge half-pie slice, that means Bob Carol and Dave aren't going to have quite so much left. But money isn't like that. Money flows. It doesn't decrease in value as it does so. Quite the contrary, the byproduct of that flow is that useful things get done. So say I give $20 to the neighbor kid to mow my lawn. How much value would you say that $20 has lost in the transaction? Interestingly, none. The size of the "pie" is still the same, but now my lawn has been mowed. If I go to the store and pay them a dollar for a soda, how much value has it lost? Well, in that case, it's actually lost 7 cents. Sales tax, you know. And I suppose if the neighbor's kid reports that $20 to the IRS, he'll lose some of it too.

So, someone who's making a million dollars a year isn't doing it by going out and taking a big slice of pie before anyone else has even got their forks out. Even the phrase "making money" is misleading. Unless you're the US mint or that fictional company I was talking about that was offering the "fresh" paychecks, no one can actually "make" money. In order to get money, you have to do something so useful for someone else that they give you their money. There are really only three exceptions to this rule. The first is charity, which I think that everyone of any political leaning would tend to think is good all around, and is in a class of its own. The other two ways are by theft, extortion, blackmail, or other sorts of illegal forcible coercion; or by taxation. I will leave the definition of what differentiates those two as an exercise to the reader, as I have yet to figure it out. If you aren't doing one of those things, then your income measures how much good you have done for other people. (or at least measures the lowest amount of good you might have done. It's entirely possible to do good for someone without being paid. It is not, however, possible to have someone pay you for doing something they don't want, unless you are a crook or a government.)

So basically, what I'm saying here is that other people making money shouldn't be seen as a financial detriment. Sure, it's no fun if you have a tendency towards envy, but if you're concerned primarily with your own well-being, then the more money other people earn, the more money there is out there for me to earn from them, and the more good those people are doing in order to earn the money they have.

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