Posts tagged with: Warren Buffett

A new study has produced an inflation-adjusted list of the richest people of all time. To give you an idea of just how rich the rich people on the list are consider that Sam Walton and Warren Buffett are the poorest guys to make the cut.

The richest person in history, according to the study, was Mansa Musa I of Mali—an obscure 14th century African king. Musa, who made his fortune on salt and gold, would have an inflation-adjusted fortune of $400 billion. Mali likely benefited from cronyism and a feudalistic command economy, but many of the others on the list made their wealth through free enterprise. Indeed, entrepreneurs crowd out emperors; out of the top 25 men (and they are all men), 14 are American businessmen.

What is most interesting about the list, though, is how much we benefit from the products and services created by these wealthy men. From cars and computers (Henry Ford and Bill Gates) to cheap consumer goods and toilet paper (Sam Walton and Friedrich Weyerhaeuser), we are better off because of the innovations and inventions that made these men wealthy. They got rich by improving the lives of millions (or billions) and contributing to the economic growth of the world.

The fruits of this economic growth are often worth more than their weight in gold—or in Musa’s case, salt and gold. The price to replace the American middle class living standard most of have now is almost incalculable. Who would trade their 21st century comforts in order to be the ruler of the Malian empire? Not me. Even to convince me to move back to the 1970s—an era before iPhones,, and central air conditioning—you’d have to promise me a minimum income of $10 million dollars.

Such is the magic of free enterprise. Not only does it make some people extraordinarily wealthy, it makes the rest of us extraordinarily better off too.

Novelist Stephen King recently added his voice to the chorus of superrich clamoring to be taxed more. He knows his critics will call for him to “Cut a check and shut up,” but King says he’s not going to be keep quiet. He believes he and other uberwealthy citizens have a moral imperative to pay more.

Clive Cook has a solution that should satisfy both sides of the issue. As Cook says, “it’s childishly simple once you recognize that two separate questions are involved.”

“‘What’s stopping Warren Buffett from paying more taxes?’ is a red herring,” says economist Bryan Caplan. ” The fundamental question is: ‘Why is government’s share of the voluntary donations market so damn small?’”

Noted NYU law professor and free-market advocate Richard Epstein has written a provocative piece titled “How is Warren Buffett like the Pope? They are both dead wrong on economics.” Here’s the money quote:

The great advantage of competition in markets is that it exhausts all gains from trade, which thus allows individuals to attain higher levels of welfare. These win/win propositions may not reach the perfect endpoint, but they will avoid the woes that are now consuming once prosperous economies. Understanding the win/win concept would have taken the Pope away from his false condemnation of markets. It might have led him to examine more closely Spain’s profligate policies, where high guaranteed public benefits and extensive workplace regulation have led to an unholy mix of soaring public debt and an unemployment rate of 20 percent. It is a tragic irony that papal economics mimic those of the Church’s socialist opponents. The Pope’s powerful but misdirected words will only complicate the task of meaningful fiscal and regulatory reform in Spain and the rest of Europe. False claims for social justice come at a very high price.

I blogged about Pope Benedict’s comments last week, and while I don’t disagree with Epstein’s main point, I wonder if he actually means to deny the importance of ethics in economics. The Pope wasn’t saying that there should be no fiscal or regulatory reform, but that such reform must consider future, and not merely present, well-being, which is actually the impetus for policies such as liberalizing labor markets. And unlike Warren Buffett, the Pope wasn’t calling for higher taxes on the rich.

In short, the Pope was making a larger ethical argument that can certainly include the much-needed reforms Epstein cites. Since the Pope isn’t an economist and doesn’t pretend to be one, we should listen to his moral teachings and try to incorporate them with sound economics, rather than disparage them as economically damaging. It is true that while Catholic social teaching stresses the importance and necessity of profits, far too many Catholic and other religious leaders neglect how profits are actually made and distributed – which Epstein briefly and usefully describes – and in this sense, it is far too easy for moralists to pit profits versus people. It would make more sense to try to relate how profit maximization can and often does contribute to the common good, but it can’t do so without ethical men and women who won’t lie, cheat and steal.

I’d like to think that both the Pope and Richard Epstein are right.

In “Stop Coddling the Super-Rich” investor Warren Buffett, one of the world’s wealthiest men, makes a case for upping the tax rate on the “mega-rich” in America. In a response published on National Review Online, Acton Research Director Samuel Gregg observes that “this is a broken record that Mr. Buffett has taken to re-playing over the past five years.” He points out that the U.S. tax system is already heavily progressive (no pun intended) and that the label “mega-rich” may not be as obvious as Buffett would like us to believe:

It’s safe to say that a substantial number of these people operate small-to-medium-size businesses that don’t play the corporate welfare game a la General Electric, that are already subject to some of the world’s highest corporate tax rates (most of which is paid by the owners of companies), that reinvest much of their income in expanding their activities and taking on new risk, and, above all, that employ people. They are the engine of growth and employment in America today — not the United States government. Why on earth would we disincentivize them from creating value and jobs by raising their taxes?

Read Samuel Gregg’s “Taxing Warren Buffett” on NRO.