Tuesday, July 13, 2010

Savings, Investment, and Wealth Redistribution

“It is only a slight oversimplification to say that prosperity is largely a matter of saving and investment. The enemy of saving is consumption. What is consumed cannot be saved, and what is not saved cannot be invested. Resources that are not invested cannot be used to replace machinery that is worn out or to increase productivity.” (Herbert Schlossberg, Idols for Destruction, p. 128).

“…only redistributive processes are zero-sum games: protective tariffs, mortgage subsidies, and armed robberies all transfer wealth forcibly from one person to another. Economic transactions are voluntary exchanges, which means that both parties perceive themselves as benefitting. A given economic transaction is zero-sum only if one party has miscalculated or been deceived. The principle of redistribution is exploitation and the principle of economics is cooperation. Applying zero-sum theory inappropriately to economic thinking has reinforced the damage done by making envy a normative principle. Both assume that economic activities are analogous to a series of feuds in which every winner implies a loser.” (Herbert Schlossberg, Idols for Destruction, p. 128).

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