Difficult Facts About Redistribution

I suppose it is somewhat odd that "redistribution" is a bad word in the political sphere given that (1) we do it today and (2) no one seriously argues for stopping that. For example, I haven't heard any calls to end welfare or medicaid (though you do hear suggestions of various reforms). And unless you are prepared to say that welfare and medicaid are morally wrong, presumably redistribution is not always bad.

That said, I think there is a difficult fact for those who want more widespread redistribution.

This is easiest to explain by example. Let's look at Bill Gates. Many would suggest we should have taxed away most of Bill Gates's wealth and used it to improve the public welfare. That sounds nice. However, it must be kept in mind that Bill Gates is already spending nearly all of his money on improving public welfare.

Although I do not have aggregate data, Bill Gates is hardly alone amongst wealthy people. In addition to other rich businessmen (like Sergey Brin), many rich athletes like Lionel Messi (the best soccer player in the world) and even lesser known but still rich athletes like Dirk Kuyt (another soccer player) have foundations that spend their money on others.

In these cases, the question is not whether that money would be spent on the public good, because that would occur either with redistribution or without it, but rather how it would be spent. And this brings us to the difficult fact: Bill Gates is undoubtedly improving the public good more than the government would with the same money.

How can I say this? Well, most of Bill Gates's money is spent on improving health across the world. In other words, it's spent mostly on helping the poor. In contrast, most money spent by the U.S. government is not. It is spent on defense, social security, and medicare, which largely help the non-poor.

Indeed, I think there theory that explains why this would often be the case. The U.S. government is going to spend money on what the median voter wants, and the median voter largely wants to improve the lot of the median voter. Of course, they do want to help the poor as well, but a much smaller fraction of both their wealth (and the U.S. government's wealth) is sent on the helping the non-poor.

Hence, in the case of BIll Gates, "redistribution" would not mean transferring wealth from the rich to the poor but rather from the poor to the middle class.