A Letter to a Young Self-Described “Proud Socialist”

Here’s a Don Boudreaux follow-up letter to Ms. Leah Grant, a young self-described “proud socialist”:

Ms. Grant:

I’m sorry that you found my response to your first e-mail “offensive.”

In your latest e-mail you object to what you call my “caricature of [the] case for massive wealth redistribution.” In your words, “people who accumulated billions of dollars or even just multi millions can’t possibly use all of it.”

If by “use all of it” you mean consume all of it, I agree. While, for example, Jeff Bezos’s net worth is roughly 70,000 time greater than my own, there’s no way that he can consume 70,000 more goods and services, however measured, than I can consume. But Bezos can – and in fact does – investthe great bulk of his wealth.

And by investing this wealth, Bezos and other billionaires (and even tens-of-millionaires) make their fortunes available for the likes of building and improving capital equipment, for funding research and development, and for supplying seed money for entrepreneurial start-ups. In short, this wealth is already being used as you say you wish it to be used, namely, “for the good of all humanity.”

Note the irony, Ms. Grant: the economic case for massive wealth redistribution in our economy is weak precisely because you are correct that very wealthy people cannot possibly personally consume all of the wealth that they own. Their inability to consume all of their wealth prompts the very rich to use nearly all of their wealth, not to gratify their own material desires, but in ways that improve the economy’s and workers’ productivity. And so to the extent that government confiscates this wealth through taxation, it diverts this wealth not away from being idly consumed but, instead, away from being industriously employed.

Sincerely,
Donald J. Boudreaux
Professor of Economics
and
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030

P.S. If the very wealthy attempted to consume all of their wealth they’d not remain among the very wealthy for very long.

The above originally appeared at Cafe Hayek.