In claiming that despite being hardworking and talented, he is not sure that he deserves the fruits of such virtues:

Take me, for example. I’m smart and hard-working. I don’t know if it’s because of my genes, or because my parents brought me up right. But whatever the cause, I didn’t do anything to become smart or hard-working. And that’s the reason why I was able to go to good schools, get a good first job, and make more money than the average person, at least for a few years there (before quitting to go to law school). When I was young and frankly immature, being smart gave me a sense of entitlement. Now I just feel sort of lucky (“sort of” because I’ve learned that there are many more important traits than intelligence).

There are already 270 comments below his piece, which is entitled ‘Do Smart, Hard-Working People Deserve to Make More Money?’.  I doubt there is anyone reading this blog who has not thought about it.  I certainly have, particularly since a run of financial luck that started in 1996 and carried on so long that luck no longer matters.

Some of the respondents below agree passionately: maybe they accept Cohen’s analogy, voiced in the New Statesman, that having talents is just the same as finding yourself better at fishing on a big communal camping trip – and monopolising the fruits of such fortune would be the same as the good fisherman hoarding the fish:

a) Harry loves fishing, and Harry is very good at fishing. Consequently, he catches, and provides, more fish than others do. Harry says: “It’s unfair, how we’re running things. I should have better fish when we dine. I should have only perch, not the mix of perch and catfish that we’ve all been having.” But his fellow campers say: “Oh, for heaven’s sake, Harry, don’t be such a schmuck. You sweat and strain no more than the rest of us do. So, you’re very good at fishing. We don’t begrudge you that special endowment, which is, quite properly, a source of satisfaction to you, but why should we reward your good fortune?

But the answer that comes back – that there is something bad about failing to reward virtuous behaviour, is clearly strongly felt.  Read this comment:

I’m currently middle to upper-middle class, but I should be doing *much* better based on my intelligence. Lack of drive, lack of hard work, and some really personal choices along the way have put me falling short of what my level of intelligence potentially offers. Now you’re going to offer me an excuse to stop pushing myself? You’re going to offer ALL people like me an excuse to stop pushing themselves?

The problem, of course, is that high rewards come from luck, rent-seeking, entrepreneurial vision, hard work, and the ‘right’ answer for each depends on empirical investigation, the secret conscience of the person in question, and much else.   One thing is for certain: I don’t much trust the state to get it right.  But in general, the richer someone is, the more likely they are to have benefitted from forces beyond their control or desert, and for this reason progressive taxation, blind to individually judged virtues, is the best second-best solution.


2 thoughts on “James Kwak is provocatively humble

  1. ‘If you do not get your deserts, thank God for that mercy.’ applies somewhere in this.

    ‘The greater the economic well being of an individual; the greater the element of rent in that well being: therefore the less the economic damage from taxing some of it away ‘ appears to be part of your stance. Bu t does it matter if the individual simply accumulates wealth and the gives it away or leaves it to others (e.g. Gates and Buffett)? Is there any reason to think that accumulations of wealth will be managed more economically efficiently if taxed away? So, should not the progressive tax be on consumption? That would make the prodigal and the wastrel pay rather than the prudent accumulator.

  2. If you could be sure that they would act like Buffett or Gates (who both passionately believe in estate taxes, then I would agree.

    I certainly don’t take the default view that the state will do it better. But in this country would it not end up just subsidizing born-wealthy-idleness?

    Also, our starting point is a massive deficit: the counterfactual is the state getting some money some other way, I think.

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