Excerpt 1: Hauser’s Law
The fact that politicians who want to tax the rich more miss is that such actions appear to have little impact on tax revenue as a percentage of GDP. Tax revenue in the US as a percentage of GDP appears to average about 18 percent, within a range of 16–20 percent over time, even when marginal rates vary from 92 percent to 28 percent. This is the last seventy years of history in the United States. This empirical observation is sometimes referred to as Hauser’s law. It is not a law, but it is an interesting empirical observation.
This result of flat tax revenues as a percentage of GDP occurs because of three possible factors. One is that if marginal tax rates are punitive, it makes sense that individuals will be less motivated to work to make additional income. The second factor is that wealthy people invest their money in such a way to minimize the taxes they pay. The third is the use of lawyers and tax advisers who always seem to be able to creatively use the complexities of the tax code to come up with tax-avoidance schemes. If the federal government wants more revenue to spend, then its best course is to grow the economy faster, not to tax more. There is quite a bit of evidence that cutting taxes increases growth, which in turn increases the absolute tax revenues the government takes in. Both John F Kennedy and Ronald Reagan cut taxes and demonstrated this outcome in the nineteen sixties and eighties respectively.
Excerpt 2: The Lifeboat Dilemma
The following is based on real events that took place in the Mediterranean.
You and your wife and two children are sailing in the Mediterranean in a thirty-foot boat. Suddenly you see people in the water not too far away—lots of people, maybe two hundred or so. You sail closer. As you get close to the nearest persons, they cry out for help. You start to pull aboard a few people, but soon your wife says to you, “We cannot save all these people. If we are not careful, they will swamp the boat, and then we will all be in the water.” As you see more and more people swimming toward your boat, you realize your wife is right. You start your engines and start to back away.
At this point you have rescued six people. No sooner do you start to back away than a lady who speaks good English says to you, “You must try to save my sister. She is a Christian. I am a Christian. These other people are Muslims. Before our boat sank, when it was in trouble, they threw all the Christians overboard. They tried to kill us. My sister is just over there. This man in your boat is one of the Muslims who threw us overboard. You are a good Christian man. Please save my sister and throw this man back into the water.” Such are the moral dilemmas in dealing with the disparities in wealth and cultures that surround us.
Excerpt 3: Is Islam A Cult?
The religion of Islam got its start in Mecca in about AD 613. Back then the population was made up of Jews, Christians, and pagans. Muhammad (AD 570–AD 632) started in Mecca with proselytizing but was not successful. He then moved to Medina in AD 622 and turned into a muscular leader, raising armies, killing enemies, robbing the conquered, robbing caravans, and taking many wives for himself. From this history emerged Islam. Islam is a religion that is more like a cult. If you are born into it, you are not allowed to leave. In Islamic countries, converting to another faith has serious consequences. The crime of apostasy is punishable in different ways, from “civil death” (job loss, the denial of education of children and certain rights, breakdown of family ties) to a prison sentence or the death penalty. Islam teaches that the primary purpose of life is to worship the Prophet Muhammad. The religion places many demands on an adherent’s behavior, and the punishments for disobedience are harsh. Islam has a history of not tolerating other religions. Iran has some historical constitutional tolerance for other religions, but in practice the Iranians are theocratic. Saudi Arabia does not tolerate any public display of any other religions. It places women in a subservient position to men. It is strongly tribal. The imams and mullahs have immense power. If they declare something to be blasphemous, then there are consequences for that behavior, up to and including death for those responsible. In Iran, the mullahs control and run the country. In Saudi Arabia, the imams share power with the royal family.
Excerpt 4: Jihad Explained
From the Christian point of view, jihad by terrorist action is a manageable problem. Yes, people are killed in the West, but the number of deaths is relatively small and it does not disrupt our society. We need to understand that such terrorist actions will continue in the West for at least the next forty years. Jihad by conquest has the Sunnis fighting the Shia (ISIS in Syria and Iraq, and Saudi Arabia in Yemen), with the Christians and Jews in the Middle East being collateral damage. The jihad by emigration is the most immediate threat that the Christians need to be concerned about. Hijrah, or jihad by emigration, is, according to Islamic tradition, the migration of Muhammad and his followers from Mecca to Yathrib, later renamed by the Prophet as Medina in the year 622 CE. It was after the Hijrah that Muhammad for the first time became not just a preacher of religious ideas but also a political and military leader. That was what occasioned his new “revelations” exhorting his followers to commit violence against unbelievers. Significantly, the Islamic calendar counts the Hijrah, not Muhammad’s birth or the occasion of his first “revelation,” as the beginning of Islam, implying that Islam is not fully itself without a political and military component.
To emigrate in the cause of Allah—that is, to move to a new land in order to bring Islam there—is considered in Islam to be a highly meritorious act. “And whoever emigrates for the cause of Allah will find on the earth many locations and abundance,” reads the(Sura an-Nisa 4:100). “And whoever leaves his home as an emigrant to Allah and His Messenger and then death overtakes him, his reward has already become incumbent upon Allah. And Allah is ever Forgiving and Merciful” (Sura an-Nisa 4:100). The teachings require that the believer in a foreign land hold himself apart from the nonbelievers. Obviously such teachings prevent assimilation.
Excerpt 5: The Golden Goose, Democracy and Free Market Capitalism
The extraordinary wealth increases the West has enjoyed are the result of practicing free market capitalism. Free market capitalism performs at its best in certain environments. It requires certain governmental/institutional conditions to set the table, so to speak. In addition, it requires individuals who want to play the game. The people who want to play the game are the technical innovators who allied to the entrepreneurs can with the support of investors turn ideas into products and from there create businesses.
The role of government is to ensure the following things:
-The individual ownership of property
-The ability to receive patents on innovative ideas and technology
-Regulations that ensure free and competitive markets
-Regulations to enable financial markets to function
-Tax policies that are supportive of wealth creation by individuals
-Investments that support fundamental research
-A commitment to fair and equal treatment by the government (empirical evidence shows that this requires a separation of religion from the state)
-An independent judiciary system to police the government and businesses
-A system to deal with business failure quickly
-The enabling infrastructure, such as airports and roads
All of these requirements from government exist, not perfectly, but to the greatest extent in the United States, Europe, and certain other advanced economies. We tend to take them for granted. However, many countries do not have such an institutional structure.
Culture also plays a big role in supporting a successful free market economy. Important ingredients are as follows:
A history of successful role models. This factor is particularly strong in the United States, which has a long history of successful industrialists, including recent examples such as Bill Gates (Microsoft), Steve Jobs (Apple), Mark Zuckerberg (Facebook), Jeff Bezos (Amazon), and Elon Musk (Tesla). Such success stories inspire young people to try.
The willingness of individuals to provide the funds for start-up companies through crowd investing, angel investing, and venture capital. Again, the United States is particularly strong in this area.
Access to technology and the engineers who understand it. Between the universities, the government’s national laboratories, and privately funded work, the United States is well positioned.
The acceptance that many companies fail and the willingness to give individuals a second chance. Again, the United States accepts that failure is an unavoidable part of the creative destruction of capitalism and evolving technologies. The US bankruptcy laws allow for the rapid resolution of business failures and a redeployment of the assets.
There are many places in the world where free market capitalism has very little chance. Also, there is no place in the world where a 100 percent pure example of free market capitalism exists. Milton Friedman used to hold up Hong Kong as a great example of free market capitalism, but that was before the British left and it came under the wing of Beijing.