I have spent a lot of time considering the question of government redistribution of wealth, as it raises a number of interesting questions. Obviously, as a general principle, universally applied, it is a failure, there is simply no way, with the government redistributing all wealth, with the overhead of government added in, that people could be, on average, better off than they are now. ("The Limits of "Scientific" Management", "Bureaucracy Revisited") Then again, some will argue a poor man gets more benefit from a dollar than a rich man, so the total benefit, in non-monetary terms, is greater, so perhaps we still do need to examine that question.

On the other hand, if we do accept that the total benefit cannot be greater, there is still the question of whether there could be some other benefit which is of greater importance than the overall economy. The argument above, about the poor enjoying each dollar more, is one such argument. Others would argue the government can remove economic inefficiencies ("Bad Economics Part 10", "Two Examples of "Inefficiency" in Capitalism", "Cutting "Costs"", "Misunderstanding Profits"), or maybe that the economy is improperly distributed, and they could make things run better  ( "The Inherent Disappointment of Authoritarianism", "The Inevitability of Bureaucratic Management in Government Enterprises", "The Right Way", "You Don't Drown in a Glass of Water - Vouchers Revisited", "Why Vouchers are not the Answer", "Never Ascribe To Evil, A Discussion of Education", "Medical Reform, An Overview", "Government Efficiency", "High Cost of Medical Care"). However, those two topics are no more plausible than the overall economic benefit, as I have shown in the linked articles. Still, I will take some time at the beginning to explain the reasoning once again.

But, having dismissed these arguments, I still am left with one question, while redistribution may not make the economy better overall, in monetary terms, nor in any other measurement, is there an argument for some that they might benefit from government redistribution. That is, while it may harm the whole economy, what about those who get lucky and end up receiving more than they pay? Don't they benefit from redistribution?

And that was the topic I intended to address when I started writing, and will still remain the focus of my post. My argument, in preview, is that they will not. For all but the most indolent, the amount they receive from the state will be less than they would benefit from the improved economy caused by a lack of redistribution. In addition, as costs will rise, and opportunities fall with the economic harm caused by redistribution, it is likely that in the end increasing benefits will pay less, and, as rolls increase, benefits in real terms will decline. Lastly, anyone expecting to be a beneficiary may be disappointed for many reasons. First, there is no guarantee of benefits, they can always be removed. Second, the poor lack political clout so truly are at the mercy of arbitrary rulers, and also subject to suffer from periodic austerity measures intended to appease voters. Third, as costs hurt the economy, the rolls will increase and benefits of necessity decline, or else some may be excluded, leading to even one time beneficiaries risking loss of benefits. Fourth, the bad economic effects of redistribution risks total economic collapse, which would leave nothing to pay benefits. Finally, as we see in the former USSR and elsewhere, even in defective economies, without any social services, the poor often were better off under an inequitable system than under a flat distribution system.

Which leads to the final argument, and one I cannot answer as it is based on one's underlying philosophy, and that is that the redistributionist system is "fair" as all are equal even if all are worse off. I have addressed before the lack of purpose in the term "fair" ("A Question of Fairness", "Protean Terminology"), but for this argument, let us pretend "fair" has some meaning. The question is, do you agree with the philosophy that is embodied in that definition? ("Deadly Cynicism", "The Citizen Dichotomy", "In A Nutshell", "Cognitive Dissonance Part 2", "The Right Way", "The Danger Inherent in Banning "Bad Ideas"", "Contradictory World Views", "Bad Economics Part 12") The idea that it is better all suffer in poverty lest those who work harder have more? Or is it better to reward efforts, to encourage self-improvement, and allow each man to rise and fall as far as his abilities will carry him? Because, despite bad arguments to the contrary ("Bad Economics Part 16", "Greed Versus Evil", "Planning For Imperfection", "The Triumph of Good", "Fairness and the Free Market"), the free market does precisely that. It does not reward favoritism -- or, what little favoritism manages to persist for a short time, it is far less significant, and far less persistent than that under arbitrary government ("Bad Economics Part 17", "Anti-Business Businesses", "How Government Creates Crime", "Utopianism and Disaster") -- it simply creates a predictable environment ( "The Problem With Evolving Standards",  "In Praise of Slow Changes", "Predictability", "Conservatism, Incremental Change and Federalism", "Empathy" Threatens not "Justice" but Predictability", "Sotomayor and Empathy", "Interpretation and Activism", "Why Judicial Activism Hurts",  "The Problem With Tort Reform", "Red Herring", "A True Conservative Platform", "A Perfect Example") in which one can fulfill his potential.

However, all of those argument require quite a bit of explanation, so let us begin with my preliminary arguments, showing that redistribution is bad for the society as a whole, regardless of how one measures success. (Excluding, of course, "fairness", as that will come later.) Once we have finished that, we can move along to the argument proper, explaining why even limited groups cannot truly benefit from redistribution.

Let us start with the obvious. If the government takes all the available wealth and redistributes it, there will be less total wealth, as the government distribution itself will involve some overhead, meaning the wealth passed from non-government individual to non-government individual will be less than that original total, or, in short, government will absorb some wealth. In addition, by flattening wealth, leaving no pockets of greater wealth for investment, economic growth will be slowed considerably, not to mention that those saving to start or expand firms will lose that opportunity. On top of that, the individuals who do the distribution for the government will be removed from the work force, leaving fewer workers and creating less wealth. So, if we look at the whole picture, the redistribution will redistribute an inordinate amount of wealth to the government, will reduce available labor, and will slow or stop investment and economic growth. Which means, looking at the economy as a whole in purely fiscal terms, redistribution is harmful and will result in serious damage to the economy. The only question is whether after the initial redistribution, inequalities are allowed to form, in which case the damage is temporary, or if redistribution will occur from time to time, in which case the economy will eventually collapse, as the constant redistribution will favor consumption without investment or growth, leading rapidly to total collapse.

But some, as I said, will argue that there are other ways to measure benefit. For example, they claim a poor man treasures each dollar more than a rich man. However, the facts do not support this. If these poor men truly valued money, they would be doing as much as they could to gather more wealth, trying to work more, gain more training and so on. That most who remain chronically poor do not put in such efforts, and that the rich do, suggests that the rich truly value the wealth more. Yes, the poor may claim to do so, but the behaviors they exhibit argue that they do not truly value wealth, they simply wish for unearned wealth. The fact that they rapidly spend new found wealth, and do not care about whether they can retain it, or gain more later, also argues that they value it less than some suppose. So, while it sounds nice to say the poor value every dollar more, the behaviors they display argue for the opposite¹.

Actually, behavior tends to invalidate any argument that people value goods, services and the rest differently than monetary values suggest. Were that the case, then people would change their behavior and prices would change to reflect that belief. In other words, the price system is a near perfect reflection of the composite desires and valuations of the public (allowing for some lag, and some human error in estimating the desires of one's customers). So, there is simply no way to argue that the "true wants" of people would produce something different. The free market, with its price system, is the most true reflection of the desires of the public.

Which brings us to the remaining arguments, that the free market is somehow inherently defective. Whether or not the price system reflects the public's wishes, it is wrong. Either it is inefficient in meeting the desires of individuals, or those desires are somehow "wrong", and people should be pursuing different wishes. The former tends to focus on some sort of "objective" measurements under which the free market can be shown to be "wasteful". The latter, on the other hand, cannot rest on any objective criteria, and so, though unspoken, the assumption is that the critic knows better than the public at large what should and should not be desired, and that the differences between the public's wishes and the wishes of the critic prove the error. ("The Inherent Disappointment of Authoritarianism", "The Right Way")

 The first topic I have addressed in several posts, mostly in "Bad Economics Part 10". It would be too much to present the entire argument here, so allow me to make it as simple as possible. Let us look at an analogy. An army exists to kill the enemy, and so every soldier should serve to kill enemy soldiers. Thus, we could choose to see any soldier who does not kill an enemy as "waste". However, what would happen were we to eliminate every soldier who served in logistics, transportation, purchasing, mechanics, medical services, even those who cook, cut hair or maintain plumbing? Obviously the army would collapse. While the purpose of an army is to kill, we recognize it cannot serve that purpose without an elaborate support structure, and without those many individuals who do not directly kill the enemy, the rest could not perform their duties.

Yet when it comes to the free market we somehow imagine we can strip off bits and pieces and yet have the whole continue to work the same. Many times we hear of "waste" in advertising, or in the multitude of different insurance forms, or many other seemingly "non-productive" uses of resources. The implication being that with government involvement, we could do without such "waste", eliminate advertising or enforce a single choice of forms, and retain all the benefits of the free market without these additional costs.

But these theories are akin to suggesting we can run an army without doctors, cooks, quartermasters or a motor pool. Yes, advertising does not produce goods and may seem "wasteful" to those who dream of a state run factory producing what they want when they want. However, advertising is an essential part of competition, and competition is the engine which drives most of the efficiency of the free market. To eliminate advertising, one must partly cripple competition, and, as a consequence, eliminate many pressures which reduce costs, increase benefits and spur innovation. In short, to do away with this "waste" we need to essentially eliminate the things that make the free market the free market. What remains may vaguely resemble the free market, may even be so designated ("Bad Economics Part 17"), but in truth it is a government run economy, and has none of the benefits of the free market. That is the logical outcome of such attempts to eliminate waste².

In this way the first argument fails, the features it calls waste, and attempts to eliminate, cannot be removed without destroying the free market itself, and thus there is no way to eliminate "waste" from the free market.

The second argument is also the subject of a number of posts, particularly "The Inherent Disappointment of Authoritarianism" and "The Right Way". Again, I won't go into as much detail here as  I have, but will only address two arguments. First, I will point out the weakness of the position of those who rely upon these theories. Second, I will explain and examine the philosophy underlying this argument. As this is the same theory which underlies the "fairness" argument I mentioned earlier, it is here that I will deal with the simple question of whether anyone really wishes to be associated with the philosophy behind these position, and whether anyone at all really believes them.

The first problem is the one I pointed out in my post on authoritarian fantasies. Everyone who argues for imposing the "right choices" assumes that those choices are identical with their own valuations. And as a result, almost every partisan for authoritarianism is disappointed come the revolution. (This is one of the many reasons so many movements begin their regime with large scale purges, and why so often the bulk of political prisoners in such states were once the most ardent supporters.) Of course, those pushing this argument do not see such problems. In their mind, their beliefs are so obviously correct that it seems no one could fail to see their truth. It is why they imagine most people are stupid, as that alone could explain their inability to see the obvious truths. And so, since they think their beliefs are the only possible beliefs, they imagine that any revolution would inevitably follow their own prejudices, and impose their will in its entirety³.

Of course, basing one's hopes on the "self-evident" nature of one's beliefs is always risky. Until one finds out ind etail what a given movement endorses, it is likely one will find himself disappointed by the eventual victory, as the odds that anyone shares absolutely identical beliefs is incredibly remote. Even if that vanishingly small probability happens to work out, there is then the problem that any given movement will inevitably need to compromise at some point, leading to the failure of practice to match beliefs. Which means, those dreaming of imposing their will upon the rest of the public are unlikely to ever see that reality come to pass.Even should a movement sharing their beliefs in general win power, it is likely that the practical implementation will be quite disappointing to them.

But even if it were not so, the question arises, why should anyone be able to impose their beliefs on others? By what standard are the values of any given individual "wrong?" Excluding violating the rights of others, which behaviors are right and which wrong? These individuals claim that they can improve the world, because people value the "wrong things", they price Hollywood block busters above a cure for cancer, or Miley Cyrus above space exploration. But, by what standard is that wrong? And by what right can we then force those who want to hear Miley Cyrus to instead fund space exploration?

The argument, though never explicitly stated, is that the speaker knows better. That his own valuation of things is the "right" valuation, and that the values of most of the world are base don foolish mistakes. Basically, though they will not say it, they are claiming most of us are stupid, and they know best. Which is the argument behind not only the claim that the government needs to "correct" the market, but also the claims of a need for "fairness". All such claims are premised upon the assumption that most people are wrong, either from stupidity or ignorance or because they are misled. that there is a small group of much smarter individuals, and that those individuals are in possession of some correct "absolute values", that these smart individuals know what ratio of various goods and services would result in the greatest happiness for the greatest number. Or maybe, not happiness, but the greatest "benefit", in some loosely defined sense.

But that premise is nonsense. First, how can we know those claiming to be enlightened are any smarter than the rest? Would not a fool also say he was smarter? In fact, if we predicate our beliefs upon general incompetence, does it not follow that a generally incompetent public cannot identify their superiors properly, and so they would be condemned to poor government, the rule of the idiotic, for all times? Second, even if they are superior, if they disagree among themselves, on anything, how can they claim to have the "one right answer"? And if they lack that right answer, then why should we obey them? If they cannot agree, then how can we know what they propose will be any better than what we have? If there is no single right way, then their basic argument fails.And that makes their whole theory invalid.

But the final problem is the most basic. Nothing is "good" or "bad" outside of context, yet they never provide the context, simply suggesting there is some absolute "right and wrong" in one's choices. But that makes no sense. A knife is "good" if I want to cut, but "bad" if I want to clean my child's ears, and useless if I want to make snowballs. All valuation is contextual, and individual. There is no one set of values which is "right" for all. If we propose that an economic system is intended to satisfy the wants of citizens, then the free market is the best system, as it comes closest to a completely accurate amalgamation of the individual desires of all individuals. And that makes it pointless to try to come up with another system which does what the free market already does.

But, if we base the "better" and "worse" performance on some other basis, we must first determine what that basis is, and then argue why it is more valid than individual satisfaction. However, these claims never do. Instead, they simply imply they are based on satisfaction, but explicitly deny such, so as to be able to use traditional economics without being bound to its conclusions. And so they come up with whatever conclusions they desire, while never explaining how their choices are not only "right" but better than what the free market would produce, all without evidence.

Which brings me at long last to my original question. Whether or not, given the general failure of redistribution for the economy overall, some individuals might not manage to receive more benefit than the costs they pay for the government. In short, are there some who benefit from government redistribution, and, if so, do they continue to do so over time, or is it only a short term benefit? Because we know there is no way for redistribution to be of general benefit, can it still be argued that some would support it, as for them it is beneficial? Or is there no reason for anyone -- other than politicians and others who derive political benefit --to support such measures?

And, also as we said above, the answer is clearly "no." In general, there is little or no benefit, even in the short term. Unless we look at the immediate moment one receives government payment, there really is very little argument one would better off taking the funds of others through the government than earning his own income, or even living on private charity. But even if we allow that there  may be some short term "winners", there is simply no way that one can benefit in the long term.

The basic fact is that the numbers simply do not add up for the benefits of government redistribution, at least provided you are willing and able to perform some work. Let us say the government wants to give you $100. First, there is overhead, so they would have to take at least $120, or maybe even $150 to get the $100 to give you. Had that money simply gone to private charity likely the lower overhead would have brought more money than government generosity⁴.

But that is hardly the most productive use of the money. Had that $150 or more not been absorbed by the government, it would have been used in consumption or investment which would have supported new employment. As no one invests to lose money, the $150 in investment would have supported a job producing more than $150. And, since employees are paid close to the marginal benefit of their employment, they would have earned money close to the amount the investment would net. Thus, the choice is likely between being a leech for $100 or being a productive member of society for well over $150, all supported by the same cash.

Of course, there is the question of what would happen to the government workers supported by the overhead taken from the money, and they would have to find alternate employment. However, as I pointed out in "Bad Economics Part 14 ", labor is the one resource for which there is infinite demand. Were the government to renounce those actions which produce chronic unemployment, there would definitely be plenty of work not only for former beneficiaries, but also for those who once earned a living by providing government benefits.

Actually, as I pointed out earlier, there is even more to the story. By keeping workers idle, those on the dole, or in non-productive tasks, such as providing benefits, while depleting pools of potential investments, government generosity ends up weakening the economy, reducing overall wealth, raising prices and otherwise making the money doled out purchase less. So, not only do the beneficiaries end up with less money, but the money they get buys even less than a comparable amount in a free economy.

And, if we take this to its logical conclusion, the weakening of the economy will eventually result in greater and greater loss of income, making it more attractive for marginal workers to take benefits. As the number of beneficiaries rises, the drain will increase, and ever more will be added. In addition, as costs increase due to collapsing productive capacity, benefits will need to increase. At this point either the number of beneficiaries will need to be reduced, leaving many without either source of income, or else the drain on the economy increased, hastening the collapse of productive ventures.

Of course, eventually the system will become unstable, but likely long before then the government will be forced into some sort of reform. As a result, many will find themselves no longer eligible for benefits. However, having lived on benefits for so long, they will find they also have few prospects for employment. In short, by taking the dole, not only did they receive less than they would had they worked, once the impossibility of a consistent welfare state becomes obvious (as it did for example in 1994), they will find themselves lacking in job skills and this forced into entry level positions when they should have a comprehensive work history.

In other words, by relying on welfare, people receive less and set themselves up for much worse later on. And so, while the benefits one recieves for not working seem appealing to some, looked at rationally it is a losing proposition.

Some will now object and ask about those who "cannot work". However, as I wrote before in "Perverse Incentives", the definition of "cannot work" is much more flexible than many think. Steven Hawking works, yet most would think him fully disabled. I work, yet I am sure if I wished I could qualify for disability payments. Without the government to provide payments, many who "cannot work" will find they can. Yes, there will be some who truly are too disabled to work, but, with the government taking less, it is likely many families will find themselves able to care for their disabled relatives where now they cannot. If not, the money available to private charity is also going to be much greater. ("Private Charity", "Private Charity Take Two", "Liberalism's False Dichotomy") There may be a handful of cases where truly disabled individuals do not get aid, but that is the case now as well, and we do not use that failing to argue against welfare, so why should it argue against freedom?

And that is pretty much my final thought on the matter, as with most schemes of intervention, protection, and other authoritarian systems, what seems to some a winning proposition is simply a loss seen through too little thought. Some may think they win through redistribution, but in the long run they lose more than they gain. They may be blinded by the pittance they receive, but were they willing to look at the whole, they would see that they are denying themselves much more, while getting very little in return. And yes, it does allow them to live without working for a time, but it is quite unlikely they will be able to do so forever, and even if they did, the amount of time and effort they put into complying with rules probably works out to be almost as much effort as a job would entail. Yet they imagine the trivial amount they receive is more than they could earn in a job, which is nonsense.

But as the government gains from the system, as dependence on the dole creates a pool of voters who reliably support big government schemes, I doubt we will ever hear a government study showing the losses from these examples of government "generosity". But that does not mean they are not true. Only that the government, like all organizations, tends to see thing sin the light most favorable to them.

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1. I have recognized this in my own life. A number of people I know have started businesses. Many were not as clever as other friends who remain workers earning much less. However, those who became wealthy did so because they put in the labor demanded to become rich. I know I personally do not have that passion for any business, and so I am not suited to become an entrepreneur. I do love writing, and could probably make a career of that, but even there I am not as diligent as some. However, I do not claim this proves life is unfair, just that I do not engage in the actions needed to see greater success. Because of this I do not begrudge others their success. We simply value different things. (Fiction writing may be a little different, as there is some elements of fortune, in which editor you happen to reach, and the arbitrary nature of literary fashions. However, I have often allowed rejection to eventually discourage me from writing, so even given the elements of chance, I am at least partly to blame for my lack of success.)

2. For those who argue that some changes are "unimportant", such as imposing uniform forms, I must ask this: Why do businesses not do so now? If it would be so beneficial, why would they not adopt this practice? That they fail to adopt it suggests either there is no benefit, despite the beliefs of the proponents, or else the differing forms have benefits each firm, and so are retained. In other words, making such an "unimportant" change would either impose needless costs to no advantage, or else would do away with differences in forms the firms find beneficial. The supposed "savings" exist only in the minds of the proponents, or only if we look at the question from the point of view of the government (or in the case of medical forms, with the assumption of an eventual government takeover).

3. This explains many of the problems with large, but poorly defined, reforms. For example, many on the left supported "health care reform". Thinking that reform would inevitably be of the variety they support, they often failed to hash out the details, and so were surprised when the eventual bill differed from their own dream laws. Again, this is not unusual for such movements. How many times have those on the left split over details after a hard-fought battle for a given "reform"? Because they assume their beliefs are identical with the truth, they never bother to work out details, and later are often surprised to find their allies did not share many of the beliefs they assumed were "self evident."
                                                                                                                                                             
4. For those who doubt the amount of overhead, as a former social services worker I can attest the amount of record keeping, processing, interviewing, auditing, and so on that goes into a single case is tremendous. If anything 50% overhead may be an underestimate. Not to mention the salaries and benefits that are paid to government employees.

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POSTSCRIPT

I wrote the post "When Help Hurts" on a similar theme.