A Bad Time to Invest

November 29, 2011 • Commentary
This article appeared on The New York Times (Online) on November 29, 2011.

They say that lotteries are a tax on people who are bad at math, but there are one‐​in‐​a‐​million people who get lucky and win big. Most of the time, the rest of us are happy for them, particularly since they almost always seem to be of modest means.

But how should we feel about rich people who get a big payoff? If a bunch of wealthy guys from suburban Connecticut strike it rich(er), do they have some special obligation to use the money for the “common good?” Especially since they benefited from a perverse — albeit voluntary — form of redistribution from the less fortunate!

Like most libertarians, my initial response is that we should all mind our own business. We shouldn’t tell lottery winners how to spend their money, just like we don’t want other people to tell us how to spend our money.

But let’s set aside courtesy and politeness and offer some unsolicited advice.

In normal circumstances, being good entrepreneurs and investors is the best way for rich people to help the rest of us. All economic theories, even Marxism and socialism, are based on the premise that capital formation is a key to economic growth and rising living standards.

In other words, we need saving and investing to create the conditions for more jobs and rising wages. And since the world has learned that it’s not a good idea for the government to be in charge of such things, that means we rely on the private sector — including (gasp!) rich people — to set aside some of today’s income to finance tomorrow’s prosperity.

That being said, one wonders whether rich lottery winners have any good options. We already know that companies are sitting on more than $1 trillion of cash because they don’t perceive any good investment opportunities. We also know that banks are keeping more than $1 trillion of excess reserves at the Federal Reserve because they also don’t see many profitable ways of investing.

In other words, it seems that 11 years of more spending and more intervention under Bush and Obama has created a rather infertile economic environment.

So perhaps the rich lottery winners should give away their money. One good place to start … ahem … would be think tanks that are working to promote economic liberty and personal freedom.

About the Author