15A007 That 80/20 Rule by Jim Davies, 1/25/2015    


I've noted before that the prolific Con-Lib writer Gary North sometimes gets it wrong, so when he gets it right, as is often the case, it's only fair to point that out. Last week, he did the world a great service here, by puncturing the moral pomposity of OXFAM and others who deplored the wickedness of earning a great deal of money.

That charity (which is arguably a cover for left-wing propaganda) took the opportunity of the annual rich-kids' party in Davos, Switzerland to beat its chest about The 1%, said to own about 50% of the world's wealth. Allegedly, that isn't fair. The unstated premise is that in a proper, moral world all the kiddies should share equally in its goodies.

Except for the few wise and good people who make sure that the distribution is and stays equal, of course. Hey, there have to be some animals more equal than others, right?

Far from challenging the quoted statistic, North confirmed it, and said it was perfectly normal and inevitable; it's the way things are, or at least the way things have been since 1897, when the Italian mathematician Pareto first measured it. In the 117 years since then, government policies everywhere have striven to redistribute wealth from those who earn it to those who (in their ineffable wisdom) are judged to deserve it, but it hasn't made a dime's worth of difference; the 80/20 rule seems inviolate - perhaps a Natural Law, comparable to the amazing Fibonacci ratio.

Quoting Wiki, "It follows that one also has 80% of that top 80% of effects coming from 20% of that top 20% of causes, and so on." Hence, the 80/20 rule implies a 64/4 rule and a 51.2/0.8 rule, which is close to the 50/1 case about which OXFAM so pitifully moaned.

Is it fair? - if not, then should the world be somehow re-built, so as to overcome Pareto? That smells to me like a cure vastly worse than the disease, but let's pause on the fairness question. The distribution of wealth and income is the result of transactions, not accident. Some people work hard, some are idle. Some have many talents, some only a few. Roughly, the outcome of wealth distribution relfects such factors, and such factors (like it or not) are simply not equal. And it would be a terribly dull world if they were equal - though it seems impossible to me that it ever could be so.

Equality would mean that everyone could play basketball equally well, perform surgery equally well, program computers equally well, compose symphonies equally well, and run businesses equally well. There would be no mediocrity, and therefore no excellence. That is a world hard to imagine, and impossible to implement; human beings just aren't like that. The whole concept is nonsense. Reality is that each of us has differing skills and differing inclinations to put them to use. Indeed, each differs by ambition; some drive themselves 16 hours a day to climb to the very top, others enjoy life more by working enough to provide basic necessities but otherwise smell the roses. Real equality happens when everyone can pursue their own happiness, their own way, without interference.

Towards the end of his article, Gary North noted that although the 80/20 (hence, 50/1) rule seems inviolate, the particular composition of the one-percent varies a good deal. He might have instanced the old Soviet Union; there was certainly a very rich upper class in that supposedly classless society, and it was made up of smart political operators, who had faithfully followed the Communist Party line all their lives. They were rich not because they had provided services so well that millions lined up to buy them, but because they had figured how to work the political system to their advantage.

And so have many of the rich folk meeting in Davos; they are in bed with governments. They are good at exchanging favors with movers and shakers who wield force; for as Franz Oppenheimer observed, there are "two fundamentally opposed means whereby man, requiring sustenance, is impelled to obtain the necessary means for satisfying his desires. These are work and robbery, one's own labor and the forcible appropriation of the labor of others." Today's rich and poor in the world are in place largely by the latter means.

In the coming zero government society there will be no political system and hence no opportunity to use force, and robbers will be tagged with a record of their dishonesty so that few if any do repeat business with them. Assuming the 50/1 rule remains inviolate there will continue to be an unequal distribution of wealth, but only as a result of voluntary exchanges. That distribution will, therefore, be "fair" by definition.

One other result will follow E-Day: the amount distributed will be far larger, for no government will slow its growth.


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