There's been a plane crash - how do we proceed?

[johnhenry]

You and I were passengers on a plane that crashed. There were 8 others on board.  It managed to land on an uninhabited island with enough resources to sustain us physically.   We all survived the crash and are healthy.  We are all the same age.  We are/were all American citizens.

The island is naturally divided into 11 sections that appear to be equal in size, quality, etc.  The plane crashed in one of those. 

After a few years we all realize there's not much hope for rescue.  We should prepare to live together for the long term.  Our only attempt to "govern" ourselves had been to unofficially/unanimously agree that each of us can live on one of the 10 sections, while the one the plane crashed on, which also has a lake, is "public".  We've also noticed after these couple years that our attempts to farm the land could be greatly improved if we could improve the irrigation/drainage to the parts of island conducive to farming.  It's a project that we all agree is beyond the capability of any one of us, not to mention this "public work" would require drain and irrigation lines to traverse some of the "private property" we have unofficially taken possession of as individuals.

So as the 10 of us start discussing the best way to come together and achieve this public work that we unanimously agree is needed to contribute to sustaining our society, there are lots of ideas about how to get it done.  We are all also in agreement that even though this one "public work" is all we intend to accomplish as a group at this time, it makes sense to go ahead and structure a government by putting rules in place to handle anything else we wish to handle in the future.

Some in the group have floated the idea of just having each "citizen" contribute to the public work by donating his/her rudimentary tools and labor to the project in equal increments until the project is complete.  The rumors indicate that the idea has support because most would like this government to only be as "big" as necessary to get the job done.  But there are grumblings from some with weak backs that the labor should be denominate in hours, while those with strong backs think we should measure contribution by some more productive metric.  Although we all agree that method will require more "bureaucracy" to measure the required contribution and make judgements about it.  Not to mention, deciding how to handle it if someone doesn't pull their weight!!

That option is essentially levying a tax, but the tax would be directly paid in hours of labor or measured units of labor.

Some of those that "own" land closer to the irrigation/drainage sources have mentioned that they shouldn't have to contribute as much since it doesn't "take as much work" to get a portion of their land upgraded as it does to service the fields of those further from the natural resources in question.  Of course those with land further from those resources don't want to be discriminated against just because the land they own is slightly further from the natural resources. 

Since our group has been discussing ways to set up this new "government" we decided to nose around the wreckage of the plane to see if there was anything that would be beneficial in our endeavor.  We found a whole pallet full of Federal Reserve Notes (20 million dollars), several trunks of gold coins.  The kind of treasure every kid dreams of!!  Did we just become rich!?!?!  Some of us thought so.  Others weren't so sure. 

At this point some of us had accumulated some small amount of material wealth in the form of some sheep, some stored grain, coconuts, and some small houses/sheds.  However, it didn't make much sense, we thought, to require tax payments measured in grain or coconuts or sheep, because collectively we didn't want the hassle of trading those things with each individual citizen in exchange for the public work we wanted done.  We all agreed, one alternative to issuing tax directly in labor would be to use one of these tokens we found, dollars or gold coins, to measure obligation.  Obviously none of us could pay any tax in coins or dollars until we received some first.

Some of our group insisted that the paper dollars had no real value, but gold did; and they advocated using gold for this endeavor.  But there were rumors that two of the land owners among us had discovered a healthy deposit of gold straddling their property line.  When those 2 voted for using gold, the rest of the group voted that down.  It may have just been a rumor, but they didn't want those 2 to be able to meet their obligation to the group by handing over something they found in the hillside instead of digging ditches like the rest of us!!  Can't blame 'em.

We still haven't worked out the details, but we agree that we should be able to make this huge pallet of dollars meet our needs as tokens to denominate the required contribution to this public work.  If we agree/estimate that the first phase of the project will involve each person(10) digging for 20 hours per week for 4 weeks then we could calculate that we'd need to provision 800 hours of labor from our citizens for that phase.  So we (our government) could tell each citizen that at the end of the 4 week period he/she owes $800.  Then our government would pay $10 per hour for each hour of digging.

So long as each citizen worked 80 hours over that period, this tax would have the same effect as demanding the tax directly in labor.  But one result of denominating the tax with the dollar tokens is to allow one citizen to, say work an extra hour so he could buy a sheep from another citizen who would then need to work one less hour to have enough to pay his tax at the end of 4 weeks.  Of course this rudimentary arrangement does allow for any citizen to accumulate any dollars as savings beyond the horizon of 4 weeks!!  For that to happen, our government would need to run a deficit and spend more than it demanded back in tax!!

Some citizens have suggested that if our tax is going to be denominated in these dollars, our government may as well create(take off the pallet) enough of them for us to use in our economic endeavors.  There's no sense in running a balanced budget, taxing back every dollar of spending when we could "hand out" a little extra for use among us.  We all recognize that we can't eat those dollars and we aren't any richer by receiving them, but we also recognize that so long as we are completely in control of exactly how much we spend for our public endeavor of ditch digging and how much we demand back in tax, there can be no negative affect of creating extra money, so long as it is done in a fair way.  For example, in addition to the $10 per hour we agree to pay for each hour of digging, our government could just give each citizen $100 each year.

But not every one is on board with this proposed arrangement yet.  Now that we are having discussions about money and taxes and we hear that there may be a new government that prints money, some of our citizens are wondering about signing up for this new system of money and tax where the money is intended to serve as a fair measure of obligation to this public work.  A couple of our fellow citizens recognize that our new system proposes using dollars.  And dollars are exactly how they measured their fortunes back in America. They have rummaged through the wreckage and have managed to find paperwork that indicates the exact net worth of each of us on the day we departed America!!  They suggest, we should move forward with this public work that needs done, but they do not like the idea of just handing each citizen $100 a year.  Since we know the net worth of each citizen from our past life, they suggest we should divide up the whole pallet of money along the same percentages!!  Most of our fellow citizens (6) were not mustachian and had a net worth of about a thousand dollars each.  You and I, due to our mustachian nature, had a net worth of about $1M each.  But it looks like these other 2 guys have the paperwork and sure enough, they were billionaires with a net worth of $10B each!  Their argument seems pretty valid, right:  America was a free, fair place to live, we are all the same age, and together the 10 of us had a cumulative net worth of $20,002,006,000.  So of the $20M in notes we found in the plane, they each get 49.994%, or $9,998,997.10.  You and I get $999.90 each. The other 6 get $1 each.  Once that formality is out of the way, they are OK proceeding with a tax to fund the public work, denominated in dollars, so long as the tax is the same for each citizen.

So, how do we proceed?? 

[MDM]

Some in the group have floated the idea of just having each "citizen" contribute to the public work by donating his/her rudimentary tools and labor to the project in equal increments until the project is complete.  ...  Not to mention, deciding how to handle it if someone doesn't pull their weight!!
...
So we (our government) could tell each citizen that at the end of the 4 week period he/she owes $800.  Then our government would pay $10 per hour for each hour of digging.

So, how do we proceed??

Either way you have to decide what to do if someone doesn't
a) "pull their weight"
b) "pay their tax"

Without an enforcement method, it's all voluntary.

[johnhenry]

Some in the group have floated the idea of just having each "citizen" contribute to the public work by donating his/her rudimentary tools and labor to the project in equal increments until the project is complete.  ...  Not to mention, deciding how to handle it if someone doesn't pull their weight!!
...
So we (our government) could tell each citizen that at the end of the 4 week period he/she owes $800.  Then our government would pay $10 per hour for each hour of digging.

So, how do we proceed??

Either way you have to decide what to do if someone doesn't
a) "pull their weight"
b) "pay their tax"

Without an enforcement method, it's all voluntary.

Agreed.  In this scenario each citizen does have "wealth" in the form of land they've essentially been "given".  So one option is to hold auctions of their property until their tax obligation, measured in dollars, is raised.  Of course that only works in the situation where the government runs a deficit of dollars so the other citizens have saved dollars to be spent at the auction.

But for repeat "offenders", at some point all of their assets will have been auctioned or seized by the "state", at which point they will essentially become a serf on the property of another land owner.

Ya, it can get ugly fast for those who don't "play by the rules", which in my mind is one valid to perform mental exercises like this one to make sure rules are fair in the first place!!  Obviously this is intended to raise just as many questions as answers, but I think it's fair to say our society could use more priority on fairly measuring obligation to the group and less on enforcing private property rights.

[mak1277]

OK pretty much this :-)!

But seriously, while I don't think thngs would get "lord of the Flies-ish", I don't think any of the things you put forth would happen in reality. But I realize you were asking more of a political (utopian?) question not a real life plane wreck scenario.

I disagree...I think things would absolutely get lord of the flies-ish.

But the fact is, in the scenario described, you are on an island with a de-facto family, not a "country" that needs to be governed.

[johnhenry]

OK pretty much this :-)!

But seriously, while I don't think thngs would get "lord of the Flies-ish", I don't think any of the things you put forth would happen in reality. But I realize you were asking more of a political (utopian?) question not a real life plane wreck scenario.

You are exactly right.  This thought experiment isn't intended to help in case one of us winds up in this extremely unlikely scenario :)  It's intended to help grasp an understanding of what money, taxes, wealth really are. 

[Clean Shaven]

This seems like a reasonable approach:

[TheOldestYoungMan]

None of your choices is what happens next.  What happens next is:

http://welkerswikinomics.com/blog/2007/06/03/gambling-prostitution-and-theft-rampant-among-yale-monkeys/

Ditch digging is not the oldest profession.

And you use the gold coins.  A pallet of federal reserve notes is best saved for use as toilet paper.  It's washable and durable.

[bacchi]

Obviously, the first thing to recognize is that a monetary re-boot is necessary. Everyone starts at $0.00.

Given that there are only 10 people, and there is no state army or police force, the wealthier people will likely lose in a vote. (As one of the wealthier people, I'll also vote with the probable majority.) While there may be wealthy sympathizers if we were still in America, the obvious disconnect would surely spur most? (all?) of them to vote for their own interests.

Eta: Agree with the gold coins. If only the coins are accepted as currency, someone can't just dig up a chunk of gold and not do any ditch digging. In other words, the value is in the coin and not the gold.

[Killerbrandt]

I am so confused by this post hahaha Why are we even talking about currency and separating land? The population is so small and survival would be tough that they all would need to work together until the end. I doubt any one of them could survive for long on their own. We cannot make this tiny 10 person survival story the same set up as a country that has way more resources and population. If there does end up being one lazy or bad person, the group as a whole would probably vote and settle that, but other than that, they all would need to pool the resources to survive.

[johnhenry]

OK pretty much this :-)!

But seriously, while I don't think thngs would get "lord of the Flies-ish", I don't think any of the things you put forth would happen in reality. But I realize you were asking more of a political (utopian?) question not a real life plane wreck scenario.

I disagree...I think things would absolutely get lord of the flies-ish.

But the fact is, in the scenario described, you are on an island with a de-facto family, not a "country" that needs to be governed.

If this group of 10 is too small (in your mind) to warrant a government then change the example to a shipwreck of a few hundred or few thousand on a slightly larger land mass.  Just increase the numbers of people and acres enough to justify a government and then you can tell us how to structure a fair one :)

My example purposefully used a small number to make the situation easier to analyze.  One of the points is, a system of government, money, taxes that's fair is fair for 10 and is fair for 100 and 1000 and millions.  You may argue that this group of 10 is too small to warrant government, but I don't believe that's the case.  Obviously, the size and complexity of any government is likely to increase as the population is serves increases.

The truth is, with only 10 people and no pre-existing rule of law, it's hard to imagine how a large wealth gap would be tolerated.  Do you think any of the "poor" folks in this example would agree to the system in which the 2 wealthy citizens were allowed to maintain their "inherited" wealth in the new society.  I don't think it's crazy for those 10 people to structure a government that says "no, your accumulated wealth in your past life doesn't matter, we are creating a system in which we all owe each other the same obligation, and that means your past wealth will not be represented in this society in the form of financial or real assets". 

If those 2 attempted to distribute the resources in a drastically uneven way, like taking 80% of the island for themselves or creating a system of money/taxation but declaring themselves owners of most of it... it should be obvious that those on the short end of the stick would simply not tolerate it. Let us remember, without a government, not only is there no money/tax/obligation but there is also no private property.  There can be no private property without a government to make a record of it, settle disputes over it, etc.  If those 10 were to believe the libertarians of our day they would say, "well those 2 uber rich guys did become rich back in America after being born poor, so they earned every penny of their wealth, what's the harm in letting them keep the money they had and we'll keep what we had.  After all, as long as we all treat each other equally under our new rule of law, money doesn't matter, we are all equals."  The small population size of this example serves to illustrate how wrong that thinking is.  And it is just as unfair with a larger group. 

Because it's impossible to devise a system of money and taxation that allows accumulation of financial or other wealth without simultaneously lessening the obligation of wealth holders to the rest of the group.  That idea should not be novel.  After all, that's why we all want wealth.  So that we can "enjoy" the fruits of our contributions to others in the group by using our wealth to buy from others that which brings us enjoyment.  For wealth to have any power it must be relative, not absolute.  We must be wealthy COMPARED to our neighbor if we want him to be willing to work at our request.  And that idea is acceptable when it can be ensured that each citizen accumulated his wealth within a meritocratic system.  This example just illustrates the inherent inequity in a system where citizens START with unequal obligations to their government, due to inherited wealth.

[mak1277]

If this group of 10 is too small (in your mind) to warrant a government then change the example to a shipwreck of a few hundred or few thousand on a slightly larger land mass.  Just increase the numbers of people and acres enough to justify a government and then you can tell us how to structure a fair one :)

It's impossible to create a government that all people think is "fair".  Even in a group of 10, you'll have leaders and followers, strong and weak, etc. And the strong (whether it's physically strong, financially strong or otherwise) will always have an advantage over the weak, and the weak will always feel that that is not "fair".

Even if you all start with zero, eventually someone will have more (more pieces of paper, or grains of rice, or whatever).  "Fairness" is a canard.  Life's not fair.

[Kwill]

I think they need to start at 0 for their wealth on the island. Save the $20 million in Federal Reserve Notes for just in case they ever get rescued, although they might not be allowed to keep the money in that case.

It's kind of too bad for the future of this mini-civilization that none of the survivors seem to have liked each other much. But what if two survivors decide to get married and start a little family on this island? Now together they have twice as much land as any of the individuals. It's harder for them for awhile, but fifteen years later, they've got three kids helping out on the farm and doing chores. Maybe they also make a kiln and start making ceramic cups and plates and cookware to sell to the neighbors. If as a family they end up producing more food and tools than anybody else, can you blame the parents for wanting their children to have the benefit of all the hard work they put into building the farm and designing good tools? If one of the parents dies young, do you then take his/her half of the land and goods away and redistribute it?

[johnhenry]

Obviously, the first thing to recognize is that a monetary re-boot is necessary. Everyone starts at $0.00.

Given that there are only 10 people, and there is no state army or police force, the wealthier people will likely lose in a vote. (As one of the wealthier people, I'll also vote with the probable majority.) While there may be wealthy sympathizers if we were still in America, the obvious disconnect would surely spur most? (all?) of them to vote for their own interests.

Eta: Agree with the gold coins. If only the coins are accepted as currency, someone can't just dig up a chunk of gold and not do any ditch digging. In other words, the value is in the coin and not the gold.

HA! I actually thought a lot about this when writing the scenario. Whether to make the gold in the example "coins" or nuggets.  Because I agree completely, gold only enjoys it's lofty position as a measure of wealth among humans through our history because it has regularly been accepted/demanded by governments as payment. 

So I'm glad to see someone understand that gold in this "pretend" sovereign government or any other is only as valuable as the "stamp" that's on it.  Or in other words, it's valuable because of the tax obligation that it extinguishes.  You'd be hard pressed to convince a gold bug that his nugget of gold was worth NOTHING while your much smaller gold coin was worth.....whatever amount of tax your government said it extinguished.

But now that someone has correctly pointed this out, can you explain why gold is superior in this case to the pallet of reserve notes?? 

Or better yet, change the example so there is "plenty" of gold on the plane but it is in bars and nuggets of all different and uneven shapes and sizes.  Not to mention very heavy.  And don't forget that there may or may not be plenty more of this stuff on some of the "private property" on the island.

Now, what is the argument for using gold?? When it would require melting it down and reconstituting it in equal amounts... and even then has minimal protection again counterfeiting efforts.  How could you justify the use of gold in that circumstance when the pallet of notes is readily available??  Not only available, but available in a quantity so large that it could "service" the society for many generations to come.  (Until we were smart enough to create stone tablets or spreadsheets to record "virtual" dollars as we do now.)

I will readily admit any token chosen to measure/extinguish tax liability must be protected against counterfeiting in order to serve it's purpose.  But for anyone who shares that position (doesn't everyone?), how do you justify a government that declares "money" to be any natural resource like gold that may go away by sinking to the bottom of the sea or be found in any hillside??

[johnhenry]

If this group of 10 is too small (in your mind) to warrant a government then change the example to a shipwreck of a few hundred or few thousand on a slightly larger land mass.  Just increase the numbers of people and acres enough to justify a government and then you can tell us how to structure a fair one :)

It's impossible to create a government that all people think is "fair".  Even in a group of 10, you'll have leaders and followers, strong and weak, etc. And the strong (whether it's physically strong, financially strong or otherwise) will always have an advantage over the weak, and the weak will always feel that that is not "fair".

Even if you all start with zero, eventually someone will have more (more pieces of paper, or grains of rice, or whatever).  "Fairness" is a canard.  Life's not fair.

Fair enough.  Life is certainly not fair.  But you are not concerned at all about "how fair" life is for yourself and your fellow citizen?  I think it's safe to say life is MORE fair for you and your fellow citizen today than it was for those toiled to build the pyramids in Egypt or the railroads across America.

You are lucky enough to live in a time and place where you can shrug your shoulders and say "eh, life's not fair".  As humans we can't guarantee that we'll all live to the same age, marry a loving spouse, or die with same amount of "wealth".  And I'm not arguing that we should try.  But we do have the privilege (obligation) to concern ourselves with how we govern ourselves, and YES, as a result how fair our system of government is.

And yes, sometimes life becomes so unfair for some that at regular intervals in human history it becomes necessary to fight and die against unfair oppression.  As humans, that's one price we pay for shrugging our shoulders.

[MDM]

Agreed - start everyone at $0 and ignore (maybe burn?) the cash in the plane because it would not be fair otherwise.

For further discussion, assume by "individuals" you mean "individual couples" and suspend the genetic laws about inbreeding because providing for one's family and descendants are such strong biological and psychological imperatives.

Then, given human nature, assume ~20% of the island is willing to work their butts off and thus collect payment from the other 80% who are happy to contribute their dollars in return for receiving the fruits of the 20%'s labor.

Over time, the 20% become "wealthy."  The other 80% see this, and decide to tax that wealth when the original settlers die because it wouldn't be fair for those settler's descendants to keep the money.

The 20% see this, build a boat and sail away.

Other scenarios are of course possible.

[arebelspy]

I'm confused as to why previous net worths were relevant.

[johnhenry]

Agreed - start everyone at $0 and ignore (maybe burn?) the cash in the plane because it would not be fair otherwise.

For further discussion, assume by "individuals" you mean "individual couples" and suspend the genetic laws about inbreeding because providing for one's family and descendants are such strong biological and psychological imperatives.

Then, given human nature, assume ~20% of the island is willing to work their butts off and thus collect payment from the other 80% who are happy to contribute their dollars in return for receiving the fruits of the 20%'s labor.

Over time, the 20% become "wealthy."  The other 80% see this, and decide to tax that wealth when the original settlers die because it wouldn't be fair for those settler's descendants to keep the money.

The 20% see this, build a boat and sail away.

Other scenarios are of course possible.

Alright, best answer so far.

I agree the idea of "everyone start with $0" is more fair than the alternative, but I have to ask,  if we agree that it's best to do this for the "first generation", what's the problem with implementing a 100% inheritance tax, so that each future member also essentially starts at $0.  Since wealth can be represented by other things besides whatever we declare to be money, I'm not necessarily advocating that the "government" seize those assets.  But I think it's appropriate to account for all real + financial assets inherited by someone of the next generation and set them up on a plan to pay that full amount over a set period of time. 

And deciding to "start everyone at $0" is the easy part since there are no dollars before any dollars are taken off the pallet and distributed.  And there certainly aren't any if we burn it :)  So in that case, what does the government use for payment for ditch digging (and demand in return for obligation to the group)?  You advocate using the gold??

I know humans have never "done it that way before".  But to me not having a 100% inheritance tax is like asking someone to sit down to a monopoly game and start out with everyone having the same amount they had at the end of last game.  It's pretty obvious that meticulously fair rules don't matter at all in the face widely disparate starting amounts.

[arebelspy]

I like the idea, but people want to see their own line succeed and their own work (money) go to what they want.

[johnhenry]

I'm confused as to why previous net worths were relevant.

I can't imagine any fair-minded person who would think they are. :)

But in our society each new generation is essentially in the same boat. 

Would you want to play monopoly at Christmas against all your cousins where everyone started with the amount they ended up with at the Thanksgiving game!? (Unless you were the winner of the first game :) )  Continue that year after year.  Despite fair rules would the extremely "short-stacked" ever have a shot at "winning"??

I mean you can justify this by telling your cousins, well this game isn't meant to be fair and you don't have to have a real shot at "winning" this game to have fun playing it, there are more important things in Monopoly than "winning".  And maybe the really young or really dumb cousins will keep playing year after year.   

[arebelspy]

I'm confused as to why previous net worths were relevant.

I can't imagine any fair-minded person who would think they are. :)

But in our society each new generation is essentially in the same boat. 

Would you want to play monopoly at Christmas against all your cousins where everyone started with the amount they ended up with at the Thanksgiving game!? (Unless you were the winner of the first game :) )  Continue that year after year.  Despite fair rules would the extremely "short-stacked" ever have a shot at "winning"??

I mean you can justify this by telling your cousins, well this game isn't meant to be fair and you don't have to have a real shot at "winning" this game to have fun playing it, there are more important things in Monopoly than "winning".  And maybe the really young or really dumb cousins will keep playing year after year.

One might be able to make the argument that it's not a separate game, but a continuation of the first.

If we paused the monopoly game and kept playing later, typically you'd set it up with the same situation.

[johnhenry]

I like the idea, but people want to see their own line succeed and their own work (money) go to what they want.

I agree.  While pointing out that after leaving an inheritance, one does not get to "see their own line succeed" at least after the official inheritance is left :)

And your answer is the closest to getting to the very heart of the issue.  In a system where we can know that(inheritance) will happen, of course we are more motivated to hoard it and pass it on to the next generation.  Imagine a world where that was not taken for granted.  Where a 100% inheritance tax was guaranteed.  Would people be more motivated to enjoy the fruits of their labor more while they were here?  Retire earlier instead of working longer just to pass on a bigger fortune??

Yes, the idea may be to some degree "against the grain of human nature".  But then again isn't civilization itself an attempt to get savage animals to work together for their common good instead of relying on their instincts to eat and mate as often as possible and violently settle confrontation with anyone weaker?  Is the idea of an inheritance tax as radical as the idea of enforcing "justice" when one of us kills a fellow citizen??  When that happens, we have agreed to not shrug and say, "well, life's not fair".

[CommonCents]

So this is really just a thought experiment to make us think a 100% inheritance tax is the right thing?

I don't agree.
1) They're lost on the island.  The prior metrics aren't valid because there is no access to them.  They're no longer in their (smaller) world, which consists of the island.  Meanwhile, the inhabitants aren't losing access to the wealth on the island with each new generation. 
2) It's an action to take it away on the island versus an omission to give it* "back" from the mainland. 
3) If you don't permit people to pass down wealth how they want, you'll likely end up with lower overall productivity.  Why work hard if you aren't able to do with it what you want (for the most part....I think people wouldn't expect to be able to legally hire hit men with it)?  That might mean giving to kids or to charity or spending it on themselves.  And not being forced by the government into "enjoying the fruits of their labor" now if they don't want to.  I'm hearing Ayn Rand in my head now...
4) You can achieve certain kinds of equality without a 100% tax.  You can for example, start schools and give people an equal education.  What they choose to do with their education is their own choice.  You can provide government safety nets, so everyone is guaranteed a minimum amount of resources to survive, even if they do nothing for it.

But mostly 3, which is the build a boat and sail away answer too.

[johnhenry]

I'm confused as to why previous net worths were relevant.

I can't imagine any fair-minded person who would think they are. :)

But in our society each new generation is essentially in the same boat. 

Would you want to play monopoly at Christmas against all your cousins where everyone started with the amount they ended up with at the Thanksgiving game!? (Unless you were the winner of the first game :) )  Continue that year after year.  Despite fair rules would the extremely "short-stacked" ever have a shot at "winning"??

I mean you can justify this by telling your cousins, well this game isn't meant to be fair and you don't have to have a real shot at "winning" this game to have fun playing it, there are more important things in Monopoly than "winning".  And maybe the really young or really dumb cousins will keep playing year after year.

One might be able to make the argument that it's not a separate game, but a continuation of the first.

If we paused the monopoly game and kept playing later, typically you'd set it up with the same situation.

No, I'm talking about after the game has ended and winner has been declared (usually after everyone but one is bankrupt).  Of course I like to think that monopoly is geared a little more to ensure a "winner take all" result that economic life today.  So each new monopoly game would represent not the same players, but the next generation, being forced to start with what their parents left them.

[johnhenry]

So this is really just a thought experiment to make us think a 100% inheritance tax is the right thing?

I don't agree.
1) They're lost on the island.  The prior metrics aren't valid because there is no access to them.  They're no longer in their (smaller) world, which consists of the island.  Meanwhile, the inhabitants aren't losing access to the wealth on the island with each new generation. 
2) It's an action to take it away on the island versus an omission to give it* "back" from the mainland. 
3) If you don't permit people to pass down wealth how they want, you'll likely end up with lower overall productivity.  Why work hard if you aren't able to do with it what you want (for the most part....I think people wouldn't expect to be able to legally hire hit men with it)?  That might mean giving to kids or to charity or spending it on themselves.  And not being forced by the government into "enjoying the fruits of their labor" now if they don't want to.  I'm hearing Ayn Rand in my head now...
4) You can achieve certain kinds of equality without a 100% tax.  You can for example, start schools and give people an equal education.  What they choose to do with their education is their own choice.  You can provide government safety nets, so everyone is guaranteed a minimum amount of resources to survive, even if they do nothing for it.

But mostly 3, which is the build a boat and sail away answer too.

Well it's a thought experiment intended to spur thought about the most fair way to design a money and tax system that demands equal obligation from each member of the group.  I guess that may or may not involve inheritance tax.  Most agree that it would be egregiously unfair to allow the "first" generation to start with the wealth they had acquired previous to this social contract.

[arebelspy]

No, I'm talking about after the game has ended and winner has been declared (usually after everyone but one is bankrupt).  Of course I like to think that monopoly is geared a little more to ensure a "winner take all" result that economic life today.  So each new monopoly game would represent not the same players, but the next generation, being forced to start with what their parents left them.

There is no end/winner declared in life though.  The world keeps turning, and if another player (my kid) steps in for me to play my position, and later on your kid does with yours, and the game keeps going...

That's not a new game, that's a continuation of the old one.

Unless we're starting over on a new island/planet every generation.

[arebelspy]

Well it's a thought experiment intended to spur thought about the most fair way to design a money and tax system that demands equal obligation from each member of the group.  I guess that may or may not involve inheritance tax.  Most agree that it would be egregiously unfair to allow the "first" generation to start with the wealth they had acquired previous to this social contract.

Mainly because you're taking previous value that doesn't exist here and restoring it to them.

If they had brought some of that wealth with them via salvaged luggage that included an axe, flint, etc.. I'd think they should share it as was necessary for others survival, but not beyond that.

The world doesn't have "start over" scenarios.  If they had brought extra gold coins with them, no, it might not be fair to let them use them, but if they escaped, shouldn't they be allowed to use them back in the original game?  All they did was pause the game for awhile and start a new sub-game, with everyone starting at 0 for that sub-game.

But since we don't have start over scenarios in life, that doesn't work.

[johnhenry]

So this is really just a thought experiment to make us think a 100% inheritance tax is the right thing?

I don't agree.
1) They're lost on the island.  The prior metrics aren't valid because there is no access to them.  They're no longer in their (smaller) world, which consists of the island.  Meanwhile, the inhabitants aren't losing access to the wealth on the island with each new generation. 
2) It's an action to take it away on the island versus an omission to give it* "back" from the mainland. 
3) If you don't permit people to pass down wealth how they want, you'll likely end up with lower overall productivity.  Why work hard if you aren't able to do with it what you want (for the most part....I think people wouldn't expect to be able to legally hire hit men with it)?  That might mean giving to kids or to charity or spending it on themselves.  And not being forced by the government into "enjoying the fruits of their labor" now if they don't want to.  I'm hearing Ayn Rand in my head now...
4) You can achieve certain kinds of equality without a 100% tax.  You can for example, start schools and give people an equal education.  What they choose to do with their education is their own choice.  You can provide government safety nets, so everyone is guaranteed a minimum amount of resources to survive, even if they do nothing for it.

But mostly 3, which is the build a boat and sail away answer too.

Then we fundamentally disagree about what "wealth" is.  In my mind it is never something that can be "taken" or "given".  It is part of the social contract itself.  Wealth is a representation of anti-tax. 

I don't have any problem with people using accumulated wealth to spend it as they see fit, while they are alive, because it a meritocratic system, it means they've earned it.

I don't buy the argument that overall lower productivity is necessarily a result of such a policy, but I will readily admit when designing a system of money/taxation it's MUCH more important for the system to be FAIR than to worry about how productive/unproductive your citizens may be.  Is it the job of the government to "incentivize" productivity or ensure fairness?

In a rich, productive country like the US a policy like this may very well have the effect of producing a generation of people who work much less.

[johnhenry]

No, I'm talking about after the game has ended and winner has been declared (usually after everyone but one is bankrupt).  Of course I like to think that monopoly is geared a little more to ensure a "winner take all" result that economic life today.  So each new monopoly game would represent not the same players, but the next generation, being forced to start with what their parents left them.

There is no end/winner declared in life though.  The world keeps turning, and if another player (my kid) steps in for me to play my position, and later on your kid does with yours, and the game keeps going...

That's not a new game, that's a continuation of the old one.

Unless we're starting over on a new island/planet every generation.

Sure there is.  We are born and we start our relationship with our government.  When we die that relationship ends.  There is no reason the tax credits (or any wealth) that we have accumulated should necessarily be allowed to pass from any individual to any other.

When the French Revolution came about and replaced the old system of nobility with a more equitable democracy they had to pass laws preventing the full inheritance being received by the eldest boy.  A system in which multiple heirs inherited equally was just as foreign to the ruling class then as the idea of no inheritance is to us today.

I'm not buying the argument that there is "a natural order of things" just because it's what humanity has become accustomed to.

[bacchi]

When the French Revolution came about and replaced the old system of nobility with a more equitable democracy they had to pass laws preventing the full inheritance being received by the eldest boy.  A system in which multiple heirs inherited equally was just as foreign to the ruling class then as the idea of no inheritance is to us today.

Or to the Garo, where the youngest daughter inherits. "Split it equally? And to a son? That's nonsense!"

A true meritocracy would have a 100% inheritance tax.

[arebelspy]

No, I'm talking about after the game has ended and winner has been declared (usually after everyone but one is bankrupt).  Of course I like to think that monopoly is geared a little more to ensure a "winner take all" result that economic life today.  So each new monopoly game would represent not the same players, but the next generation, being forced to start with what their parents left them.

There is no end/winner declared in life though.  The world keeps turning, and if another player (my kid) steps in for me to play my position, and later on your kid does with yours, and the game keeps going...

That's not a new game, that's a continuation of the old one.

Unless we're starting over on a new island/planet every generation.

Sure there is.  We are born and we start our relationship with our government.  When we die that relationship ends.  There is no reason the tax credits (or any wealth) that we have accumulated should necessarily be allowed to pass from any individual to any other.

It's not that simple.. there isn't a blank past.  We're born and start our relationship with our parents, who can give us things.

Or, to look at it from the parent perspective:  we're going along, living our life, and have accumulated a fair bit.  Am I free to give it away to a charity?  How about friends?  How about my child?

If I can't dictate where it goes when I die, am I free to give it all away before I die?  What restrictions are around giving away my things I've earned?

[johnhenry]

No, I'm talking about after the game has ended and winner has been declared (usually after everyone but one is bankrupt).  Of course I like to think that monopoly is geared a little more to ensure a "winner take all" result that economic life today.  So each new monopoly game would represent not the same players, but the next generation, being forced to start with what their parents left them.

There is no end/winner declared in life though.  The world keeps turning, and if another player (my kid) steps in for me to play my position, and later on your kid does with yours, and the game keeps going...

That's not a new game, that's a continuation of the old one.

Unless we're starting over on a new island/planet every generation.

Sure there is.  We are born and we start our relationship with our government.  When we die that relationship ends.  There is no reason the tax credits (or any wealth) that we have accumulated should necessarily be allowed to pass from any individual to any other.

It's not that simple.. there isn't a blank past.  We're born and start our relationship with our parents, who can give us things.

Or, to look at it from the parent perspective:  we're going along, living our life, and have accumulated a fair bit.  Am I free to give it away to a charity?  How about friends?  How about my child?

If I can't dictate where it goes when I die, am I free to give it all away before I die?  What restrictions are around giving away my things I've earned?

It's not that you are "prevented" from doing anything with your wealth while alive or controlling where it goes when you die.  But any entity that takes possession of the wealth, whether material or financial would incur tax liability to offset it.

Like I said, I understand that "there is more to life than money" and wouldn't be OK with government seizure of a non-financial assets which can have sentimental value, etc.  But even those items are wealth and should be declared as such when inherited.

But upon taking possession of the wealth, whether before your death or after, your heir, or the charity in question would incur a tax liability.  Not necessarily one that had to be met that year, but one that reflected a taxed amount of 100% or very close to it. 

As a side note I don't believe there's a place in government/society for tax free charities. If there is a common good that needs met we should fund that through the government.  Every entity, individual, church, charity, etc is taxed because they have the same social obligations.

[arebelspy]

But upon taking possession of the wealth, whether before your death or after, your heir, or the charity in question would incur a tax liability.  Not necessarily one that had to be met that year, but one that reflected a taxed amount of 100% or very close to it. 

Huh?  So if I, today, a 29 year-old, gift my friend $10, it should be subject to a (near) 100% tax?

I find that absurd.

If that's not what you are saying, where do you draw the line?  Can I gift $1000?  $500,000?  Does it have to be done a year before I die?  10 years?  How do you decide?

[pbkmaine]

As far as inheritance goes, I don't thing money is the most important thing. I inherited my mother's sense of humor and my father's curiosity. My parents loved me, kept me safe and warm, and gave me a splendid education. Those things were all the inheritance I needed to make a good life for myself. I can think of many people who inherited a lot of money but were unable to make a go of it in life.

[RetiredAt63]

Tunnel in the Sky (R. A. Heinlein) discusses this in terms of students taking an exotic terrain field exam in which they are stranded and have to form a functioning society.

Going back to the beginning, the basic premise of each person carving out their own territory is weird.  Small group = keep together and work together.  Plus presumably there would be sub-groups developing in the social order?

[Killerbrandt]

Maybe I was getting confused with this large government and currency setup for such a small group.

If the group is truly only 10 people, then they will need to just stick together and pool their efforts to make it. They probably will use a barter system or share everything in the beginning. If big decisions must happen then they can vote as a whole on it.

If the group starts growing to 50 to 100. Then you will have to have a more of a council type government separating out natural skills and making sure everyone is doing what they can for the small community. I believe the barter system would still be in favor at this level, but more law and authority will have to rise to make sure contribution is equal and growing.

Then when we get past the 100 mark the group will have to most likely change to a voting for officials type system. Also by then the area would have been more established and skills more efficient. Therefore, less people would need to do the work previously needed, this is when we can start introducing a currency system to help pay for the people that are now doing management type positions, financing, engineering, medical, and ect... type jobs. It is hard for those jobs to show a real product that can be bartered, so that is when a currency type system needs to get involved. No doubt trying to figure out pay and prices for work and items would be a huge issue and need lots of consulting and voting.

[GuitarStv]

So, how do we proceed??

The people you have landed with on the island think too much of themselves.

I would quietly murder the strongest as they sleep at night, skin them, and wear their still bleeding skins the following morning.  This would help give me the psychological edge as I enslave the weakest the following morning.  With slaves/breeding stock I could enjoy the rest of my life as king of a tropical paradise.

Cooperation is far overrated if you have a chance to simply impose your will.  Effort establishing money is wasted if you can simply use the currency of fear.

[Killerbrandt]

So, how do we proceed??

The people you have landed with on the island think too much of themselves.

I would quietly murder the strongest as they sleep at night, skin them, and wear their still bleeding skins the following morning.  This would help give me the psychological edge as I enslave the weakest the following morning.  With slaves/breeding stock I could enjoy the rest of my life as king of a tropical paradise.

Cooperation is far overrated if you have a chance to simply impose your will.  Effort establishing money is wasted if you can simply use the currency of fear.

Scary thing, this actually would work in many cases hahaha!

[Sid Hoffman]

Scary thing, this actually would work in many cases hahaha!

I wouldn't even leave it at just saying it would work.  He just described pretty much all of human history until the creation of democracies, which in comparison are an exception to the rule.  Even today they are absolutely not the rule with a ton of countries not even having truly representative government, yet still growing very powerful (China).  Might Makes Right is pretty much how it has worked for the overwhelming bulk of humanity until only extremely recently when we started to get some exceptions.

[GuitarStv]

I'm a traditionalist at heart.

[johnhenry]

http://www.nytimes.com/2015/04/26/world/europe/speeding-in-finland-can-cost-a-fortune-if-you-already-have-one.html

http://www.theatlantic.com/business/archive/2015/03/finland-home-of-the-103000-speeding-ticket/387484/

I know, it's an understanding of the world that just hasn't seen it's day yet.  It's probably decades, if not centuries from being realized.  But the writing is already on the wall. Don't forget how recently in human history those within our very borders would have been just as surprised at the suggestion that one human being cannot own another!  Or in feudal Europe how crazy it would have sounded to be told that a peasant may obtain any wealth at all, much less die wealthier than his lord.

See the links above describing a law in Finland that "punishes" speeders with fines based on a multiple of their "estimated" daily income.  They are starting to grasp the inherent unfairness of the system and have attempted to make society more fair with progressive taxation and progressive fines, like the one described in the articles.

One day we'll recognize we don't need to "punish" high earners with income-based fines or super-progressive taxation.  All that can go away if we are just taxed on it when we inherit it!!  Why wait until someone gets caught speeding to attempt to level the playing field?!?! 

It's an outdated, misunderstanding that money is something that government "takes" from citizens rather than the correct understanding that money is something CREATED and distributed for the common good and DEMANDED back as a way to measure obligation.  Hint: if you think your sovereign government or any part of it (i.e. social security, military) can "go broke", you misunderstand.  Once that understanding is obtained, it's not crazy at all to believe we should operate our society more like a monopoly game, where money is understood to have no sacred, innate value. It's obvious that the government is in charge of both handing it out and demanding it back (not just demanding it back).  And a fair society cannot be obtained until it's ensure that money is distributed and taxed fairly.  This is not about trying to ensure everyone "ends up" with the same amount.... just that they "start out" with the same amount.

[johnhenry]

But upon taking possession of the wealth, whether before your death or after, your heir, or the charity in question would incur a tax liability.  Not necessarily one that had to be met that year, but one that reflected a taxed amount of 100% or very close to it. 

Huh?  So if I, today, a 29 year-old, gift my friend $10, it should be subject to a (near) 100% tax?

I find that absurd.

If that's not what you are saying, where do you draw the line?  Can I gift $1000?  $500,000?  Does it have to be done a year before I die?  10 years?  How do you decide?

We already tax based on income.  We already have "government programs" that means test based on wealth.  We already have inheritance taxes for estates over a certain value.  We already set limits on "gifts" before tax is imposed.

We have plenty of tools at our disposal if we are ready to create a more fair society.

To answer your question, yes it would be fine to still have a lower limit like $1000 or whatever, and as long as the citizen/taxpayer didn't inherit/receive more than that amount in one year it could go unreported at tax time.  On the other question, it doesn't matter.  You get $10K or $3M in assets from someone, you incur a tax liability for it.  It doesn't matter if it came from someone who died or was still alive.

[TheOldestYoungMan]

Alright, best answer so far.

I agree the idea of "everyone start with $0" is more fair than the alternative, but I have to ask,  if we agree that it's best to do this for the "first generation", what's the problem with implementing a 100% inheritance tax, so that each future member also essentially starts at $0.  Since wealth can be represented by other things besides whatever we declare to be money, I'm not necessarily advocating that the "government" seize those assets.  But I think it's appropriate to account for all real + financial assets inherited by someone of the next generation and set them up on a plan to pay that full amount over a set period of time. 

And deciding to "start everyone at $0" is the easy part since there are no dollars before any dollars are taken off the pallet and distributed.  And there certainly aren't any if we burn it :)  So in that case, what does the government use for payment for ditch digging (and demand in return for obligation to the group)?  You advocate using the gold??

I know humans have never "done it that way before".  But to me not having a 100% inheritance tax is like asking someone to sit down to a monopoly game and start out with everyone having the same amount they had at the end of last game.  It's pretty obvious that meticulously fair rules don't matter at all in the face widely disparate starting amounts.

Would you be OK with me piling up all of my wealth at the end of my life and lighting it on fire?  Because if there was a 100% inheritance tax that is what I would do.  Or hide it.  The ability to pass on wealth, or dedicate it to a specific purpose upon your passing, is a huge carrot that keeps people producing beyond what they have the capacity to spend.  Me setting it on fire would have the same effect you claim you want, everyone "starts" at zero.  But I'm betting you have some objection to me destroying the wealth.  Something about the community somehow having a claim on what I accumulated by working harder than I needed to, and saving more of what I created then I spent.

The difference between your scenario and what you are proposing is that the wealth isn't accessible on the island.  Just because someone has 10k in the bank and their buddy has 5k that when they jointly win the lottery one of them gets 2/3 of the money.  Each transaction stands on its own.

Some on the island might very well be willing to trade in a fraction of their share on the island for an equivalent fraction of the wealthiest person's loot back in the states, shit, I'd probably offer up a 20th or something, I mean, rescue seems to happen more often than not.  But that's called gambling.  It's a thing.  The rich person isn't taking advantage of the ignorant.

The wealth gap is a myth.  Not the actual difference in wealth between those who worked hard to build something and didn't blow it all and those who f***ed up every chance they got and still manage to live awesome wealthy lives making 40k/yr.  It's fear mongering and liberal hate speech.  It's politically correct mob rioting.  Yes there are people who are fabulously wealthy.  Yes the absolute difference is growing.  But that has a hell of a lot more to do with the production capabilities of the society as a whole.  Not all of those fortunes are an ill-gotten gain.

With a median wage of 40k, the average forty year career is going to earn 1.6 million dollars.  That's more than enough for a lifetime.  There is no NEED for more.  To TAKE more at the point of a gun, is wrong.  That economic disparity exists is a fundamental reality.  The measure of how good a society is at dealing with the problem is not the difference between the richest and the poorest, it is the ABSOLUTE VALUE of the average, or median if that makes you happy (and the richest are really starting to skew that average number).  What can a reasonable man achieve in this society?  A helluva lot.  And he can move standard deviations up or down based solely on his own merits.

Within a single family of 5, after just a few years, significant tensions arise between the sibling that works hard, tries their best everyday, and the one that f***s off all the time.  The responsible child loves their brother, but eventually will cut them off.  There is nothing morally wrong with this.  It is tragic, and sad.  But it is reality.

The wealthiest man in the world built his own fortune.  So did most of the 400 richest families in America.  Or they inherited it from someone who built the fortune themselves in the past 3 generations.  If you compel them to surrender 100% of that effort upon death, you rob them of any chance to do good works or be charitable in their own right, which is much better for society overall.

I'm actually 100% in favor of basic income at this point, just because I want to document the process by which the wealthiest people go ahead and pay everyone 50k/year, and everyone still wants to tax them into oblivion because it isn't "fair."

None of these people are holding you down.  In fact, you go far enough up the food chain, it's likely one of them is the reason you have a job.  Either you work for one of their companies, or you work for a company that sells something to one of their companies.  And if you're FIRE, then your retirement probably holds shares in many or all of their companies.

The reality of the modern economy is that the wealth of the wealthiest people probably serves as a decent proxy for how many other people they have helped become wealthy.  Without Bill Gates and the other PC fortunes, Zuckerberg would be trying to get mainframe operators to "like" each other, and we'd all still be wearing hoodies to the video rental store.

On the island, the man who knows how to fish could teach the one who doesn't for free.  Or he could teach the man who doesn't in exchange for 1/10th of his catch for the year, or for forever.  It is entirely up to the man who knows how to fish.  There is no "wrong" or "right."

If the man who knows how to farm trades that knowledge to the man who knows how to fish, in exchange for fishing lessons, the viability of the group probably increases.  On the other hand, farming is harder than fishing, so maybe now nobody farms.

If the man who keeps trying to establish a government keeps annoying the two people who fish, they're going to go teach the guy who knows how to hunt to fish, in exchange for killing the guy who wants a government.  Human tastes pretty good, and we've been on the island for awhile.

[Bob W]

It would probably shake out like it did in the US in the 1860s.   

Part of the group (4) would decide to secede from the "Republic."  Which would be their right as they never signed on for this "Federalist Tax" BS. 

The remaining part of the group would be pissed and start to kill the seceding people until there were 2 left.  2 of the original group were also killed.  The 4 remaining from the original group would make sure the seceding group was impoverished and keep them and all their decedents under their thumb for all of time.  The ruling group would make sure that their friends were given plum deals when it came to government expenditures.

The leader of the now ruling group would be hailed as a hero and it would be forever banned from saying anything bad about him in the island oral history.  Because obviously killing your neighbors is the only way to accomplish your goals. 

And so it is -  the islanders forever live under the thumb of the "federalist" powers.   In order to assure their power is unchallenged the
Federalist develop a large military and police force and run just about every aspect of the islander's lives.   

Eventually the "Government" would implode due to over taxation and redistribution of wealth to nonworking islanders and the high cost of the military.   

No matter how you slice it taxes always end up at the point of a weapon with threats of imprisonment, death or taking all of one's possessions.  Because hey,  that is the only "fair" way to do it.   

[arebelspy]

But upon taking possession of the wealth, whether before your death or after, your heir, or the charity in question would incur a tax liability.  Not necessarily one that had to be met that year, but one that reflected a taxed amount of 100% or very close to it. 

Huh?  So if I, today, a 29 year-old, gift my friend $10, it should be subject to a (near) 100% tax?

I find that absurd.

If that's not what you are saying, where do you draw the line?  Can I gift $1000?  $500,000?  Does it have to be done a year before I die?  10 years?  How do you decide?

We already tax based on income.  We already have "government programs" that means test based on wealth.  We already have inheritance taxes for estates over a certain value.  We already set limits on "gifts" before tax is imposed.

We have plenty of tools at our disposal if we are ready to create a more fair society.

To answer your question, yes it would be fine to still have a lower limit like $1000 or whatever, and as long as the citizen/taxpayer didn't inherit/receive more than that amount in one year it could go unreported at tax time.  On the other question, it doesn't matter.  You get $10K or $3M in assets from someone, you incur a tax liability for it.  It doesn't matter if it came from someone who died or was still alive.

It's just so unenforceable.   A near 100% gift tax means no one ever gifts things, but that just means I buy a house and let you live there free, buy you a car (in my name), etc.

I've been for a near-100% death tax for years, but it has major issues.

I'd love to hear how you would make this practical.

[Bob W]

I'm not an economist, but -----


What about a pure inflation based taxation?   

Pretty simple concept.   The Government (in this case the US) simply creates 4T in funds for it's own spending each year.  They don't "borrow" it, they just make it.   They then spend it. 

Bingo, bamma bam --- No federal debt,  no deficit,  no income tax,  no tax accounts,  no IRS,  no government intimidation of the citizens to comply with a non existent tax code,  no worries about "on book, off book" or underground cash economies,  no offshore hording of funds by multinationals,  no need for the feds to have access to your bank and brokerage accounts and other "papers" that are guaranteed privacy by the constitution.   

The math comes out to about 13K of "created" money per person per year.  So the "inflation" tax on a couple earning 100K per year might come in at around 26%.   Of course they wouldn't be paying any federal taxes on their 100K at all.  No Medicare/SSI  (15% itself).

The prices of some things may go up while the prices of electronics and products of innovation would likely go down.  Real Estate and Stocks would go up as they currently do with our current level of inflation tax. 

The Government would also save around 1T per year in ridiculous interest charges.   (current debt would be paid of at the rate of 1T per year and take about 15 years to arrive at no debt balance remaining.

I believe the current value of assets in the US are around 200T so a "creating" of 4T by the Government may actually lead to a reduction in inflation. 

Since the inflation tax would be spread across all sectors of the voting population we wouldn't be in a situation where lower income people vote to take money from higher income people.  They would understand that any vote to increase government spending is a vote to directly increase their cost of living and decrease their monies value. 

It is an elegant, efficient and simple solution. 

Don't hold your breath as congress is not known for solutions. 


* Where countries such as Argentina and early 20th Century Germany get into trouble with this is A.  They borrow money from foreign nations  B.  They print a much larger amount of money in comparison to their GNP

[johnhenry]

Pretty simple concept.   The Government (in this case the US) simply creates 4T in funds for it's own spending each year.  They don't "borrow" it, they just make it.   They then spend it. 

Bingo, bamma bam --- No federal debt,  no deficit,  no income tax,  no tax accounts,  no IRS,  no government intimidation of the citizens to comply with a non

You do realize we already "just make it", right???  As things are, we don't "borrow" money, we just choose to pay interest directly to those who choose to convert their dollar bills to bonds.  I agree, that is asinine.  We are basically paying people because they have way more money than they need to live AND more money than they want to invest elsewhere.  To encourage saving!?!?!  Please don't let the fact that we pay interest to bond holders lead you to believe that we "borrow" money.  We don't.

You should also consider what it means for a government to "make it" vs. "spend it".  You talk about them as if they are 2 different operations.  "Spending" is how the government "makes" it.   And how it spends makes all the difference!!  Why would a government ever create a dollar it didn't intend to spend?? It's an impossible thing for a government be wealthy in it's own currency.  The most currency it can have is zero.

You are right, in a system where there was just a "flat tax" or one income tax that was a set percentage, it would appear (from the taxation side ONLY) that the "system was fair".  But at that point we'd have to examine the "spending".  When you say "spend", do you mean the government just gives $13K to each person every year?? (I'm actually in favor of a job guarantee or income guarantee, so I don't think in and of itself that's a silly proposition.) At this point your spending isn't spending, it's just money creation.

But at some point the people being governed are going to want to accomplish some common goal to which they all contribute.  Building a warship, or a highway, or a school system.  Building those "things" takes real resources from real citizens. And private citizens must be convinced to dedicate those private resources to the public purpose. The government is going to have to decide how much gets paid for each of these and whom gets paid!! Deciding who and how much to tax is the easy part, compared to how much gets created and where it goes!

As Abraham Lincoln said: "The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity."

[Bob W]

Pretty simple concept.   The Government (in this case the US) simply creates 4T in funds for it's own spending each year.  They don't "borrow" it, they just make it.   They then spend it. 

Bingo, bamma bam --- No federal debt,  no deficit,  no income tax,  no tax accounts,  no IRS,  no government intimidation of the citizens to comply with a non

You do realize we already "just make it", right???  As things are, we don't "borrow" money, we just choose to pay interest directly to those who choose to convert their dollar bills to bonds.  I agree, that is asinine.  We are basically paying people because they have way more money than they need to live AND more money than they want to invest elsewhere.  To encourage saving!?!?!  Please don't let the fact that we pay interest to bond holders lead you to believe that we "borrow" money.  We don't.

You should also consider what it means for a government to "make it" vs. "spend it".  You talk about them as if they are 2 different operations.  "Spending" is how the government "makes" it.   And how it spends makes all the difference!!  Why would a government ever create a dollar it didn't intend to spend?? It's an impossible thing for a government be wealthy in it's own currency.  The most currency it can have is zero.

You are right, in a system where there was just a "flat tax" or one income tax that was a set percentage, it would appear (from the taxation side ONLY) that the "system was fair".  But at that point we'd have to examine the "spending".  When you say "spend", do you mean the government just gives $13K to each person every year?? (I'm actually in favor of a job guarantee or income guarantee, so I don't think in and of itself that's a silly proposition.) At this point your spending isn't spending, it's just money creation.

But at some point the people being governed are going to want to accomplish some common goal to which they all contribute.  Building a warship, or a highway, or a school system.  Building those "things" takes real resources from real citizens. And private citizens must be convinced to dedicate those private resources to the public purpose. The government is going to have to decide how much gets paid for each of these and whom gets paid!! Deciding who and how much to tax is the easy part, compared to how much gets created and where it goes!

As Abraham Lincoln said: "The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government's greatest creative opportunity."

In our plane crash scenario it is assumed that all 10 people will be farmers but even in their scenario, given an irrigation conduit,  a dead fish fertilizer reserve and a compost soil development program,  one could see that it may only take 1/2 a person to grow the 10,000 pounds of vegies and fruit per year.   That could easily be done on 1/2 an acre so one really has to wonder what the big debate is about this massive irrigation system.   Why not just put the 1/2 acre near the lake and then use a simple Egyptian water distribution system.   http://www.ancientegyptianfacts.com/ancient-egyptian-irrigation.html  It really doesn't take much to irrigate 1/2 an acre. 

Funny you should bring up old devious Lincoln and his penchant for printing money.  He was the original US crony socialist that killed 20% of all the males of fighting age in this country.  He did indeed start the "greenback" and printed money by the tons while shutting down most of the actual news printing presses.   

I agree with much of what you say other that that the Government just prints money now. 

They do leverage the fed for about 25% of the  annual spending just now.  That is the borrowed portion.  The other 75% comes from forced taxation.   I just propose 100% pure printing and not borrowing.   In this post I'm not advocating the giving of 13K per person but rather just pissing it away on the programs we currently do. 

I think the guaranteed wage idea is worth debate and we will eventually come to that as jobs continue to dwindle with the computer, electronic and robotic revolution.  We already make twice as many goods in this country as we did 10 years ago with half the manufacturing workforce.  That progression will continue and migrate to other soft industries such as banking.

Will banks become a thing of the past with more and more services moving to a more efficient internet platform?   Will all mortgages, checking, savings and auto loans one day be just a click through bank?  Will bitcoin or another virtual currency replace all central banks role in printing money.   Could be that in 10 years we will all be spending googlebits that are generated in limited supply by an algorithm and backed by actual assets instead of fiat money. 

So yeah,  we need to consider the very serious possibility that 20% of the population can produce 100% of the goods and services within 15 years.   We are currently at around 50% so even a 2% improvement per year makes that 20% a possibility.

Perhaps we can convert to 3 day work weeks,  20 year careers,  10 weeks vacation at the same pay rate concept.  Maybe a person's working careers is considered to be only 840 weeks out of a 4000 week lifespan?   

We are already moving towards this very rapidly with the number of people being put on permanent disability.   It is very inefficient the way we are moving towards this at present.   

The real beauty of the full inflation tax scenario (vs our partial one now) is that government no longer has to threaten citizens with prison for failing to send in their annual honor to the king. 

We would also know exactly how much inflation to expect because the borrowing rate would not fluctuate with downturns in the economy.   It really is pretty silly now that the Government ties it's income to how well the economy is doing.   

There of course would need to be a hard cap on annual printing, otherwise the drunken sailor congress people would want to crank up the press at full speed.  That would be a sure recipe for disaster.

[johnhenry]

In our plane crash scenario it is assumed that all 10 people will be farmers but even in their scenario, given an irrigation conduit,  a dead fish fertilizer reserve and a compost soil development program,  one could see that it may only take 1/2 a person to grow the 10,000 pounds of vegies and fruit per year.   That could easily be done on 1/2 an acre so one really has to wonder what the big debate is about this massive irrigation system.   Why not just put the 1/2 acre near the lake and then use a simple Egyptian water distribution system.   http://www.ancientegyptianfacts.com/ancient-egyptian-irrigation.html  It really doesn't take much to irrigate 1/2 an acre. 

You seem to be modifying the original example to fit your ideology :)  "Given an irrigation conduit, a dead fish fertilizer reserve, and a compost soil development program".....  the key word being "given", as in "assumed".   What I hear you saying is: when it's just 10 people on the island working together, life ain't so hard, especially if we assume the hard work's already done.  Irrigation conduit here, fertilizer reserve there, soil development program thrown in.  As if those "things" don't take real work to achieve.  But as soon as we start calling the agreement among citizens a "government" then a project in question is a "massive irrigation system" and anyone asked to contribute to the project is having their time/labor/money confiscated!!  That really is how the world works in your mind!!
I like the example you threw in about the Egyptian irrigation system, as if it were built by a harmoniously by a group of people with no government, but where everyone just chipped in with a tiny bit of work each weekend to make this happen for the good of the group.  I mean, a project as beautifully small, efficient and necessary couldn't have been constructed by slave labor controlled by an oppressive government like the Egyptian pyramids were!! That system must have instead been the work of some inventive, self sufficient, visionaries, with no government in their way!!  I love it!!

But all of that misses the point.  Whether it's an irrigation system (just big enough, but not too big of course ;) ), or a gaudy pyramid, or a nationwide system of schools or highways, public projects are the very reason that democratic government should exist.  The question posed in the example was: how do we achieve those public works in a way that's fair to everyone.


Your response: government is necessarily big, government is necessarily bad.