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Philanthropists and Misers

Thursday, November 10, 2016 16:49
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(Don Boudreaux)

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Suppose that an innovative, energetic, driven, and brilliant entrepreneur – call her Rockegates – revolutionizes a private industry using only her own money and without any special privilege from government.  Consumers voluntarily purchase huge volumes of her product, and all of her workers and other suppliers praise her for her straight, honest, and fair with them.  Even after paying hefty taxes, Rockegates’ daily stream of profits is so large that within less than a year she will become a multi-billionaire.

Rockegates is also unusually magnanimous.  Each day she keeps only enough of her profits to allow her to survive in a spartan way in her cramped and dingy studio apartment located in a seedy part of town.  Each and every day she disburses her profits by arranging for them to be deposited into the bank accounts of thousands of randomly chosen people.  She performs this magnificent feat of generosity every day without fail, each day with a new randomly selected group of beneficiaries.

What would be people’s attitude toward Rockegates?  I’m pretty sure that all but the most economically ignorant “Progressive” would admire and praise her.  Because she gives away each day 99.999999999999 percent of her profits to strangers, people would consider her to be a magnificent benefactor of humanity.  When Rockegates dies after a long lifetime of unending business success combined with unending extraordinary generosity, statues will be built to celebrate her.  Boulevards will be named for her.  Textbooks will forever hold her out as one of the most generous and useful human beings ever to breathe.

Now change this little story just a bit.  Rather than distribute her profits, daily and randomly, to thousands of strangers, Rockegates daily accumulates her profits in the form of cash.  She stacks the bundles of cash up beside each other in a gigantic hangar.  Never living anything other than lifestyle that is strictly spartan, Rockegates the miser enjoys a long career as a successful businesswoman.  When she dies, the hoard of cash in her hangar is close to a trillion U.S. dollars.

What would people’s attitude be toward this second version of Rockegates?  Probably pretty dim.  She certainly would not be hailed as a great philanthropist and benefactor of the public.

But note: Rockegates in the second scenario enriches the public just as much as does Rockegates in the first scenario.  The few differences between Rockegates II and Rockegates I are economically insignificant.  In both cases, Rockegates uses her creativity, drive, and talent to enrich humanity through the products that her business produces and then through her steadfast refusal to consume herself any of the goods and services that her business success entitles her to consume.  Both Rockegates I and Rockegates II voluntarily transfer to the public nearly all of their wealth.  Rockegates I does so through the act of transferring money to stranger -money that those strangers use to purchase goods and services for their own consumption.  Rockegates II does so more directly than does Rockegates I; Rockegates II refuses to put in a claim for her personal use on any of the resources to which her business success entitles her and, thus, leaves those resources free to be used to produce goods and services for the rest of humanity.

We applaud the philanthropist and look with disdain, or even condemnation, upon the miser.  But the two are very much alike.

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