Friday, July 20, 2012

$10,000 Reward for Anyone who "Built it Alone"

I am pretty upset with Obama and his "you did not built it" comment. Sure, people are taking it out of context and making a big deal but uttering that sound bite was like fumbling the ball at the worst time. And, it was not a fumble after a vicicous hit. No he was just running in the open field and lost his concentration and dropped the ball. Whether it will be run back for the game winning touchdown remains to be seen but, if it is, he alone is the goat.

Just to test those who are offended because they "build their business on their own" I am offering a  "blow hard" reward to anyone who can demonstrate that the Obama statement does not apply to them. I guess this is an offer to small business owners but it could be to anyone who thinks they earned what ever they have without assistance. A non exhaustive list of the things you would have to prove are:

1. You did not attend a public school or recieve any scholarships.
2. You have not purchased for your business any items that were produced by a firm that employed people who attended public schools.
3. You have not employed people who attended public schools or whose parents did.
4. You have not used, for money earning purposes, public roads, sidewalks, libraries nor  have any of your employees or the people from whom you have made purchases.
5. Your parents did not pay for your education.
6. No one ever told you something you did not already know without being paid the full value of that information by you.
7. You have not purchased any items the quality of which is assured by any kind of goverment regulation. This includes engaging the services of anyone who the state has deemed qualified as a result of passing one type of exam or another.
8. No worker you hired was ever paid less than the revenue to which their efforts gave rise.


Nate said...

Respectfully, I think your criterion for determining if someone “built it on their own” are broader than what Obama meant by his comments. From my reading of Obama’s comment in context, I think he was saying that you didn’t build it without the help of government infrastructure. If this is what Obama meant, the requirement that a person does not qualify if he received help from his parents in paying for his education is not appropriate to the inquiry. Help from parents is in no way the same as help from the government.

In addition, if a person attended public school, this doesn’t mean he or his family did not pay for his education. We live in a society that forces us to pay taxes. Some of those taxes go towards funding public education. If a person attends public school, but has paid enough taxes such that his education is not being subsidized by other tax payers, he hasn’t relied on society for his education. Indeed, if he weren’t forced to pay those taxes, he could have spent the money to purchase himself a comparable private education.

Jeffrey Harrison said...

Ok, where do I mail the check? On the parent thing, I am not sure why help from parents does not count. How is that any different from a hand out from a stranger? It's a gift. On the public education matter, do you have some empirical backing that there is actually no subsidization. If so, there must be a tremendous surplus somewhere provided by all the people who pay for education but have no children or those who do have children who do not take all the state is doling out. By the way, I no difference between subsidized education and the welfare people rail about.

Nate said...

Hand outs from parents is not that different from hand out from a stranger, but it isn't help from the government. And I think Obama was saying that successful business owners have received some form of assistance from government infrastructure.

Regarding public education, I don't have any research on the topic. But I think it would be unlikely that all the people receiving public education are paying in exactly what they get out. To the contrary, I think some are paying less than what their education costs, and that costs is made up by the wealthier people who are paying more than what they receive. It is these wealthy tax payers who are receiving a public education and also subsidizing the other people who are the one who didn't get get any financial benefit from a public education. They may have received a public education, but they paid more than their fair share because they were subsidizing the less wealthy people's public education. I don't think there would be any surplus because the additional tax revenue (of people who are paying more than they receive or have no children) is going to fund the education of the people who take more than what the state is doling out.

So I think a large number of people do receive some sort of subsidization of their education by attending a public school. But there are probably some wealthy people who have parents who pay a large amount of taxes such that they would have been better off financially if they could have chosen to not pay any taxes towards the public education system and attended a private school.

Welfare is a little bit different in my mind because society is probably receiving more of a direct benefit from a public education system. An educated workforce probably leads to a more productive economy. I'm not sure there is as much of a direct benefit to society from welfare. Again, no research on this either. Just my thoughts.

I'll send you a private message with my address so you can send that check. :-)

Jeffrey Harrison said...

It would require an incidence analysis far more complicated than I could complete. I sent three kids through private school and paid taxes. I was happy that they would live in a world in which people could read, write, do basic addition, etc. So, the benefits would be very hard to figure out.
I very long time ago when I was an economist I studied the income redistribution effects of publicly subsidized medical education. It was pretty clear that the redistribution ran from those lower down on the income range to those higher up.
I am not sure what Obama was referring to specifically but even if it was government, here the government has made the decision not to interfere with intergenerational transfers of wealth when it could do so quite easily. To me inaction to allow a process to continue reflect government policy and this, one could argue that parents helping children is government policy.
To me, regardless of the source it is welfare when some derives income from any source that is in excess of their productivity. For example, I am also surprised that people will worry about welfare payments while giving farm subsidies a free ride.
Rather than send the check directly, I have made a contribution in your name to your favorite charity which I assume is the ACLU.

Nate said...

Yes, I agree it is very hard to figure out. It also depends on how attenuated of a connection you want to consider. Subsidizing education probably helps create a stronger economy by providing a more educated workforce, and most people in business benefit from that. It isn't an easily traceable direct benefit, but it is probably a benefit.

Regarding the government inaction issue, I think there is a pretty big distinction between government policy and government assistance. I don't think allowing the intergenerational transfer of wealth could constitute any sort of assistance, even if it does constitute policy. So I don't agree that the heirs of large fortunes can be said to be receiving any sort of government help or assistance any more than I can say I am receiving assistance from thieves in the world who have not yet decided to rob my house. (I don't mean to imply taxes are theft).

By the way, I like the ACLU, other than their view that the right to gun ownership is not an individual right. I'd probably be a member if it wasn't for that. But that's a discussion for another day.

Jeffrey Harrison said...

Yes, I too have come to a parting of the ways with the ACLU but I cannot recall the topic right now. Although my test for gun ownership is:If you want one, you cannot have one, I am sure my support decreased when I felt they were actually making political decisions rather than sticking to civil liberties. Actually, whatever it was, I think I agreed with the policy but their view was suspiciously politically correct.

I am not ready to say receiving money from parents is always the same as receiving it from thieves but in many cases it is. In any case, I regard as any unearned income as belonging to the community (it's just found like a sack of cash in a forest) and, from that perspective the community has elected to allow undeserving people to keep it. I don't like being taxed like this (not receiving my share of what is rightfully mine) but that's just another way the government taxes the poor to serve the rich.

Anonymous said...

Professor Harrison, I took two of your classes over the past year, and I consider you to be one of the best professors at Levin. But, I think your defense of Obama’s statement is misguided.

While the statement won’t be the death knell for Obama’s campaign, I think it represents a broader argument that individuals raise to support an increase in government spending. The argument goes something like, “the government has provided roads and schools that in the past benefited the public and increased social welfare. Thus, the government should spend more for roads, and schools which will increase social welfare.” This is an efficiency argument, as opposed to a moral argument that is beyond the scope of the point I’m trying to get across. Given the current state of technology, the argument is flawed with regard to public roads. Given the state current state of affairs, the argument is flawed with regard to public schools.

Regarding public roads, consider the Coase Theorem. In the absence of transaction costs, resources will go to their highest valued use regardless of the rules the government sets in place. If you accept the Coase Theorem as correct, you might accept that government involvement in the economy, if there should be any at all, should go to reducing transaction costs. This would ensure that resources go to their highest valued uses, maximizing current social welfare, and laying the grounds for future economic growth.

Public roads did this at one time. They allowed individuals to cheaply travel, which allowed people to meet people, and make deals that they otherwise would not have made. The reduction in transportation costs allowed individuals to enter industries that they otherwise would not have been able to afford to enter. This elimination of a barrier to entry can be interpreted as an additional lowering of transaction cost in that it facilitated market entry, allowing individuals to make deals they previously could not afford to make.

Today, technology has put transaction costs at an all time low. The internet allows people to facilitate deals that previously would have had to be done in person. While there might still be a need for public roads to keep transportation costs low, today, it is easier than ever for wealthy individuals to meet, pool their resources, and build private roads when those individuals see an opportunity to make money. In short, there is less need for the government to provide public roads. There should be less government spending to provide public roads.

The same conclusion can be reached with regards to public schools. I credit this argument to a lecture during Professor Randall Holcombe’s, a UF grad’s, Public Sector Economics class at Florida State. Compared to higher education, the government in America has had far more involvement in lower education. The result: lower quality in lower education when compared to other nations. In contrast, America is considered to house the best institutions of higher learning. While I have no empirical support to back this up, my own observations support this when considering the comparatively large presence of foreign exchange students in my undergraduate and law school classes. Doesn’t this disparity in the quality of lower and higher education suggest that the government’s involvement in lower education could, for some reason, be detrimental? It’s a possibility that should be considered. For now, the government should decrease its funding of public education. Obama should stop making arguments to increase it.

Jeffrey Harrison said...

It May surprise you that we disagree very little. First, I think the premise of the speech was that the wealthy should be willing to help more in part because of the help they had received. My reaction was to the claim they had "built it themselves." I did not hear anything about raising taxes generally nor about a need to increase spending overall. So, my post was not in support of that.

I am also a little surprised at your FSU's professor's analysis of education. I think any thorough study would indicate the difference in quality is related to many factors other than government involvement including an array of demographic factors. He is comparing one huge population of students with a much smaller and different population of students.

On the merits of public spending, I would have to consider each category. I am sure there are things I would cut and other things I would increase. I would probably cut all subsidization of upper level professional programs and replace it with scholarships awarded on the ability to pay. Much of the spending on higher education goes to subsidize students with money collected from tax payers who cannot afford college or law school even a subsidize levels. Professional school are no less a capital investment than buying a crane.

Roads are actually not part of transaction costs. If I buy an item in Chicago part of what I buy is the delivery to gainesville. Nevertheless, I would have to consider road usage -- amount and type of use. A private system of roads would involve enormous transactions costs -- who would pay how much, holdout problems, efforts to free ride and roads that actually are economically justified may not be built.

In fact, from my perspective the main impact of government is a reaction to transaction costs. Roads are but one example. Police and military are another along with product labeling standards, food and drug quality control, etc. I know government is very inefficient. Believe me I see it every day and many of my posts are about this. On the other hand, the transaction costs of large scale production in an international context of many services are prohibitive. What this means is that it may be efficient for these services to be provided but if left to the private sector it will not happen.

Basically, the issue is how one defines public goods. I may define it more broadly than you. For example, I regard lower level education as a public good. I want to pay taxes to support people to be educated who would not otherwise be able to go to schools so that I can live in a world of people who can read and write and, hopefully, learn basic practices that are consistent with good health. Schooling based on ability to pay would not achieve that. Although, like you it seems pretty hopeless.

Anonymous said...

"my test for gun ownership is:If you want one, you cannot have one"

Honestly, one of the dumbest things I've read on this blog.