Sunday, March 15, 2009

Why John Galt Matters

I'm referring, of course, to the protagonist of Atlas Shrugged.

You don't have to be a Reagan Republican, Randian Objectivist, or Burkean Conservative to understand one critical fact about humanity: though we are created equal, and we stand before the law as equals, and we shall be judged by deity as equals, nevertheless, we are not equally productive. I happen to be quite inept at government BS paperwork and this keeps my accountant happily employed. And I do other things better than she does.

Human inequality is a multidimensional thing. I write software for a living. I'm told that there is a factor-of-ten difference between the most productive and the least productive software engineers. Compare the output of these 10X more productive programmers working a 90-hour workweek versus the low-productivity guy who works eight-to-four then out the door.

Contrast the contribution to society of someone with a ton of education and experience versus a high school drop-out on drugs. Consider the societal impact of the former working long hours versus the latter working the minimum.

Scale this up across an entire society and compare two competing societies. The Soviet Union had the best mathematicians on the planet. And there was more oil in Siberia than in Saudi Arabia. In 1917 the Russian economy was the fastest-growing on the planet. Yet, that turned around and somehow the Soviet Empire collapsed. Jimmy Carter notwithstanding, America won the Cold War.

I think you can see where this is going. I think there's a reason why the Soviets lost and Ronald Reagan won the Cold War. We could call it his brilliant strategy, but nobody acknowledged that when he was alive. I think the reason is found in this waggish remark common in the Soviet Union: "they pretend to pay us and we pretend to work." This makes me think that a lot of Russians were doing just enough to get by. And it didn't much matter whether they were high-skilled, high-productivity, or low-skilled, low-productivity.

Jimmy Carter blamed his failures on us. On malaise. Then came Ronald Reagan who pushed through tax cuts. Unlike Mr. Bush he talked about shrinking budgets, governments, and regulation. But the big thing was that he cut the income tax rates on the highest margins.

Suppose I work 40hrs. And I pay some percentage of that in taxes. The rate at which I am taxed for the 41st hour is the maximum tax rate I'll pay. Suppose further that I'm a high-skilled and high-productivity. I'll be paid more per hour than the high-school drop-out on drugs. If you think that's unfair, remember that I'm creating more value per unit time. But if I'm giving most of it back in taxes, why should I work myself to death.

This is how Atlas shrugs. It isn't an overt, dramatic "strike" by the producers, but the accumulation of tens of millions of decisions to knock off a little early or linger a bit over lunch.

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