Non-Productive Jobs and Taxes

[Mr Skeptic]

There's three kinds of jobs. One type produces tangible goods, contributing directly to wealth. One type provides useful services. And one type is overhead or trading (trading of things like stocks and derivatives, I mean) -- it provides nothing of value but is nevertheless necessary. The government, of course, taxes all these jobs. However, production jobs are limited by resources, people, and capital. Service jobs are limited by people. However, overhead jobs don't really have limits.

 

For example, trillions of dollars are traded in the stock market every day. No actual wealth is generated -- money simply trades hands from the losers to the winners -- but I guess this is necessary to set the price of the stocks. In any case, an amount equal to our yearly GDP gets traded every week or so. Of course, the effect is to siphon money from those who are more clever or at least more lucky, away from other investors. The government could of course put a huge damper on this roller-coaster by limiting the rate at which these transactions are done, which I think would stabilize things greatly. However, why do that when instead they can just let some people win and some lose, and then tax the winners and so get extra tax revenue? Even better, it's usually going to be rich people on the winning end and poorer people on the losing end, which is extra nice since they get taxed at a higher rate and also this way they can (indirectly) tax the poorer people without them even noticing, as an extra bonus helping to make them more dependent on the government, essentially getting more taxes from them that they don't notice but of course making sure they notice any government assistance they get from our nice nice government. Of course, some people might say that such motivations would be too low even for our government. To these people, I say just look at how the government treats normal gambling.

 

On a similar note, it would be in the government's financial best interests to encourage the exploitation of poorer people (essentially a money transfer from poor people to rich), and then taxing the rich. Due to our progressive tax system this will increase the government revenue, while at the same time making it seem like they're being nice to the poor by taxing them less.

 

So that's my little conspiracy theory for the day. What do you think? Would our government encourage or at least not prevent non-productive jobs if it would increase their revenue? Would the government encourage or at least not prevent the rich from exploiting the poor so that they can tax the money at the higher rate? Or am I being overly paranoid?

[lemur]

There's three kinds of jobs. One type produces tangible goods, contributing directly to wealth. One type provides useful services. And one type is overhead or trading (trading of things like stocks and derivatives, I mean) -- it provides nothing of value but is nevertheless necessary. The government, of course, taxes all these jobs. However, production jobs are limited by resources, people, and capital. Service jobs are limited by people. However, overhead jobs don't really have limits.

 

For example, trillions of dollars are traded in the stock market every day. No actual wealth is generated -- money simply trades hands from the losers to the winners -- but I guess this is necessary to set the price of the stocks. In any case, an amount equal to our yearly GDP gets traded every week or so. Of course, the effect is to siphon money from those who are more clever or at least more lucky, away from other investors. The government could of course put a huge damper on this roller-coaster by limiting the rate at which these transactions are done, which I think would stabilize things greatly. However, why do that when instead they can just let some people win and some lose, and then tax the winners and so get extra tax revenue? Even better, it's usually going to be rich people on the winning end and poorer people on the losing end, which is extra nice since they get taxed at a higher rate and also this way they can (indirectly) tax the poorer people without them even noticing, as an extra bonus helping to make them more dependent on the government, essentially getting more taxes from them that they don't notice but of course making sure they notice any government assistance they get from our nice nice government. Of course, some people might say that such motivations would be too low even for our government. To these people, I say just look at how the government treats normal gambling.

 

On a similar note, it would be in the government's financial best interests to encourage the exploitation of poorer people (essentially a money transfer from poor people to rich), and then taxing the rich. Due to our progressive tax system this will increase the government revenue, while at the same time making it seem like they're being nice to the poor by taxing them less.

 

So that's my little conspiracy theory for the day. What do you think? Would our government encourage or at least not prevent non-productive jobs if it would increase their revenue? Would the government encourage or at least not prevent the rich from exploiting the poor so that they can tax the money at the higher rate? Or am I being overly paranoid?

I don't think it is necessarily paranoid or conspiracy theorizing to do this kind of analysis. It might be if you thought there was a boardroom of guys in suits discussing and cackling over how much they were exploiting people with such financial market structuring and directly proposing methods that would be even more exploitative. Still, it is true that consciously or not, people tend to promote their interests in the policies they create and support or resist, so I'm sure it is accurate to say that many people have worked and continue to work to (re)create the image that this is simply a normal (efficient) form of investment and resist critique or proposals of alternatives by saying that the system does its job, etc.

 

I think you should research Thorstein Veblen on the topic of "absentee ownership," which I believe he studied during the stock-market boom in the 1920s. I also think you can generally analyze the different forms of labor you classify at the beginning of the OP and look at how they influence each other both positively and negatively. For example, some people may come to the economic rationality that it makes more sense to invest in stocks and use the proceeds to buy a house; but when many people do this, it creates a market crash that prevents other people from being able to afford a house. Then someone who can't afford a house might wish to build one, but can't afford to because the cost of building supplies has inflated to levels affordable to contractors building and selling houses at prices that stock investors can afford. So, if this was the case, it would set up the market parameters in a way that would basically require housing to be built for wealthy/investors and prevent people from building a house for themselves without first working for the wealthy to be able to afford building supplies at that level.

 

If such price-level harmonization would not occur, it would allow contractors to buy building supplies for very low cost and sell the finished house for a very high profit, which would allow the contractors to accumulate wealth much faster than the building-supply providers. However, the fact that financial-trading can facilitate such high levels of spending/re-investment creates an obstacle to market access to potential contractors with little or no investment resources, which causes them to seek jobs instead investing in their own business projects. This in turn causes people to petition government to force investors to create more jobs, which further seals the coffin of low-cost independent business investment.

 

It's not a conspiracy. It's just price-harmonization responding to the biggest spenders/investors. If businesses would cater to the lowest-spenders instead of the highest, there would be greater opportunities for low-cost independent business projects but the wealthy would become a great deal more wealthy in terms of the ratio of value between their net-worth and prices. It would also reduce profit-margins in business to levels that would require more sales volume to achieve the same or even lower levels of net revenue. Then the issue would become what the consequences would be for resource-utilization if low-cost business became more productive, since this would presumably mean that much more labor would be utilized for producing new wealth.

 

On the one hand, it could be a good thing for poorer people to be more productive, but in the event that these people would attempt to work as hard as possible to accumulate capital, the net increase in wealth would result in commodity surpluses that would in turn create a buyer's market for all the commodities produced. Such a buyer's market could depress prices to a point where profitability in business was almost non-existant. This could be very good for consumers, since they would gain unprecedented levels of material access, but they would also have little means to attain income which could prompt them to curtail consumption and thus significantly reduce demand, which could potentially paralyze supply for revenue-making purposes. Such an economy could be very liberating in terms of freeing people's time but it would also require them to come up with lots of non-profit low-expenditure activities to keep themselves busy.

Edited February 22, 2011 by lemur

[Pangloss]

To these people, I say just look at how the government treats normal gambling.

 

You mean the way it provides it as a legal means for downtrodden minorities to become wealthy communities? Interesting... Instead of calling Goldman Sachs, you could call the Cherokee Indian Nation!