The idea that government could redistribute income willy-nilly with impunity did not originate with Senator Bernie Sanders. On the contrary, it may have begun with two of the most famous 19th Century economists, David Ricardo and John Stuart Mill. Karl Marx, on the other side, found the idea preposterous, calling it “vulgar socialism.”
Mill wrote, “The laws and conditions of the production of wealth partake of the character of physical truths. There is nothing optional or arbitrary about them… . It is not so with the Distribution of Wealth. That is a matter of human institution only. The things once there, mankind, individually, can do with them as they like.”
Mill’s distinction between production and distribution appears to encourage the view that any sort of government intervention in distribution is utterly harmless – a free lunch. But redistribution aims to take money from people who earned it and give it to those who did not. And that, of course, has adverse effects on the incentives of those who receive the government’s benefits and on taxpayers who finance those benefits.
David Ricardo had earlier made the identical mistake. In his 1936 book The Good Society (p. 196), Walter Lippmann criticized Ricardo as being “not concerned with the increase of wealth, for wealth was increasing and the economists did not need to worry about that.” But Ricardo saw income distribution as an interesting issue of political economy and “set out to ascertain ‘the laws which determine the division of the produce of industry among the classes who concur in its formation.’
Lippmann wisely argued that, “separating the production of wealth from the distribution of wealth” was “almost certainly an error. For the amount of wealth which is available for distribution cannot in fact be separated from the proportions in which it is distributed… . Moreover, the proportion in which wealth is distributed must have an effect on the amount produced.”
The third classical economist to address this issue was Karl Marx. There were many fatal flaws in Marxism, including the whole notion that a society is divided into two armies – workers and capitalists. Late in his career, however, Marx wrote a fascinating 1875 letter to his allies in the German Social Democratic movement criticizing a redistributionist scheme he found unworkable. In this famous “Critique of the Gotha Program,” Marx was highly critical of “vulgar socialism” and considered the whole notion of “fair distribution” to be “obsolete verbal rubbish.” In response to the Gotha’s program claim that society’s production should be equally distributed to all, Marx asked, “To those who do not work as well? … But one man is superior to another physically or mentally and so supplies more labor in the same time, or can labor for a longer time… . This equal right is an unequal right for unequal labor… It is, therefore, a right to inequality…”
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