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Thoughts on the altered economic and ideological incentives faced by the rich and famous

Almost a month ago now, I attended an event, organised by Christian Michel, at which another friend, Professor Tim Evans, spoke about the public and private supply of public goods. You attend such events in the hope that they will make you think things that might not otherwise have occurred to you, and Tim’s talk had this effect on me. What follows is based on what I mostly wrote the day after that talk. I had intended to finish writing this and then post it here before going on a recent expedition to stay with friends in the South of France, but travel preparations got in the way of this. However, nothing in what I wrote then had to be said then or never, if you get my meaning, so here is what I put, suitably polished and amended, now.

Tim Evans’s theme was how, over the centuries, institutions for the supply of such things as healthcare, roads, lighthouses (mention was made in that connection of Ronald Coase), education, and suchlike seem to have oscillated, rather slowly and in timespans often long enough for most of those involved not to be aware of them, between private or charitable supply on the one hand, and government control and government provision on the other.

Tim’s other big point (assuming my recollection is about right – I took no notes) is that the perpetual game of political ping-pong that now rages with statists on one side and anti-statists like me (and like Tim) on the other sometimes does scant justice to the complexity of the institutional arrangements involved. So, for instance, arguments about healthcare are routinely presented, on both sides, as an argument between a total free market and total state control, when in reality medicine has long been a very mixed sort of economy. In the USA, typically held up by anti-free-marketeers as an example of what happens when there is no government control at all, the government is heavily involved with (the phrase “in bed with” also springs to mind) those quasi-political entities which determine what a qualified doctor is and who may or may not practise as one.

I like to think that I may have planted the seed of that last notion about governments and medical monopolies in Tim’s head, with a Libertarian Alliance effort of mine from a quarter of a century ago now, entitled How And How Not To Demonopolise Medicine, about which Tim has often said admiring things to me. I just re-read this, and many of the themes in Tim’s talk were alluded to in that also. At around the same time I wrote that piece, I recall expressing, in another Libertarian Alliance piece, a rather jaundiced view about charity, something Tim also mentioned quite a bit but rather more admiringly, particularly in the matter of healthcare.

Which got me thinking about the incentives faced by very rich people, and how these incentives are not the same as they are for regular people. For the super-rich, a charitable donation which is huge by anyone else’s reckoning is liable to be small change, for a start. But just as significantly, I surmise that the super-rich actually think differently from the rest of us, not just because thinking differently is probably what made them super-rich but because being super-rich then induces them some more to think differently.

I did a question-stroke-speech from the floor about how it seems that people who have become very rich find themselves obliged also to be – at the very least, to seem – very public spirited. And if pretending to be public spirited means giving charitable donations which for others would be enormous, well, pretending to be public spirited and actually being quite public spirited tend to merge into one another. I offered this fact as a reason why all these semi-public institutions can become both very powerful, and to the casual onlooker also very confusing. Who owns them? Who controls them? (Think of all those “foundations” they have in the USA.)

I mentioned two British cases, both of them exceptions which demonstrate the rule of this pressure to think differently when you’re rich. First, I mentioned how Alan Sugar, back when he was the boss of the computer business Amstrad, once said that whereas rival computer enterprises wanted to make friends with you, to help you, to empower you, and so forth, at Amstrad “we just want your money”. This remark did Alan Sugar no good. Likewise, more recently, Michael O’Leary became famous for saying similar things about his enterprise, the low-cost airline Ryanair. Both have since changed their tunes. Sugar left the computer business and now does television, embodying, as Lord Sugar, the supposed greed and brutality of business tycoons but no longer being punished for flaunting it, and Ryanair’s advertising is now much more about how nice it is to fly Ryanair, as opposed to merely how cheap it is and why.

Neither Alan Sugar nor Michael O’Leary said that their customers got nothing in return for the money their customers paid them. But, they defied the public zeitgeist by publicly emphasising the money-grubbing, penny-pinching aspect of business too much, by which I mean too much to serve their own interests. It turned out that being too public about one’s self-interest (Sugar) or about one’s enthusiasm for economising, even if that also made tickets cheaper (O’Leary), provoked bad publicity, from all those people who smelt a dissident ideology in play and were able to paint Sugar and O’Leary as being mindlessly greedy and nasty.

If I say that I am a libertarian, as I often do, I don’t lose any customers for my multi-million pound business, because of customers disagreeing with me, or because of non-customer onlookers who disagree with me deluging me and my enterprise with negative publicity. I command no such enterprise, so my opinions are not news, no matter how counter-consensual. Only my small circle of libertarian friends and readers cares what I think. If, on the other hand, I did own some vast commercial enterprise, I would find myself living in a world where me calling myself a libertarian would have major economic costs attached to it, as well as pleasures and excitements. Very rich people who make any sort of public statements about how the world is, or about how the world ought to be, thereby become also famous people. Their opinions are bound to be noticed, by potentially hostile strangers. Rich people only remain obscure (as many do) by saying nothing in public at all and in particular by keeping their ideological opinions entirely out of the public realm, perhaps acting on them, but never proclaiming them above the occasional very private murmur.

Similar pressures are felt by people who become famous as an intrinsic part of what they do or are trying to do, such as showbiz celebrities. Whereas rich people often go on to become famous, not least for being so very rich, super-successful showbiz people often get super-rich by first getting to be famous. But they too find that the line between acceptable (even admired) public deviations from normality and unacceptable deviations is one that they must be acutely aware of. Such awareness is, you might say, one of the core skills of a show-biz celebrity. They profit greatly by spotting that some formerly beyond-the-pale transgression has recently become acceptable, even somewhat admired, and can therefore be used by them to get lots of attention without them being universally detested. Being gay is a quite recent example. But if celebrities think that they can completely ignore such subtleties and just transgress regardless, they quickly learn otherwise.

This helps to explain the oddity of people who are hugely successful in the private (in the economic sense) sector routinely making public pronouncements that make them sound more like tax-and-spend politicians, and making economic decisions about charitable giving which on the face of it have nothing to do with their narrower self-interest. As a result, a super-rich businessman is just as likely to consort with politicians as with less rich businessmen, for many reasons, but in particular because top businessmen and top politicians tend to speak publicly in very similar ways.

It cuts both ways. Politicians, like super-rich businessmen, are acutely aware of their economic interests, if only because such awareness can be so very lucrative. And there’s nothing like making friends with people even richer than them to further those interests.

All this reinforces Tim Evans’s point about the complexity of the “public” arrangements that he was talking about. I put “public” between quotes there, not because I am sneering at the word, but because the word has two distinct meanings, on the one hand involving being paid for and controlled by the government, and on the other hand just meaning very visible to the public. Since this posting has concerned both of these meanings, this distinction needs to be kept clear. Such is the zeitgeist of our time that if you become public-as-in-famous, you find yourself being obliged at least not to complain too loudly about arrangements that are public in the other sense. (See also: “private”.)

And I haven’t even mentioned the whole question of how supporting public-as-in-governmental arrangements can also be very good for one’s private business. Those politicians who want to make friends with you have plenty to offer you in exchange for your wealth.

I’m not claiming that any of the above is original. I’m just doing what the standing orders to all Samizdatistas tell us to do, which is tell you good people some of the things that have been on my mind recently.

12 comments to Thoughts on the altered economic and ideological incentives faced by the rich and famous

  • Nicholas (Excentrality!) Gray

    If I win big on Lotto, I’ll let you know what rich people think like!

  • Lee Moore

    It is a truth universally acknowledged, that an old man in possession of a good fortune, must be in want of a fawning piece to camera.

  • Rob Fisher

    From an earlier post of mine: Shkreli pointed out how people used to love to hate Bill Gates, but they do not any more, now that he is giving he money away. “What else did they think he was going to do with it?” he asks, pointing out that once you have one billion dollars, you can no longer really spend any more on yourself.

    So that might be part of it, too. That the zeitgeist means rich people have to fund lefty causes is rather distressing (I wonder what the harm to good ratio of Zuckerburgs’ zillions will be). It also makes the aim of this blog to change the zeitgeist a worthwhile aim.

  • Patrick Crozier

    Of course, Elon Musk has found something to spend it on. A couple of things…

  • John B

    “the supply of such things as healthcare, roads, lighthouses…”

    Healthcare and roads are not Public Goods, lighthouses are as indeed are radio transmissions.

    A Public Good is defined as being non-excludable and non-rivalrous. Eton and toll roads indicate neither education nor roads are Public Goods.

    The problem with Government intervention is things that are not Public Goods are claimed as such justifying State control.

    But even where there are Public Goods, it cannot be assumed the markets and technology cannot find a solution: lighthouses being one example, advertising and encrypted radio emissions being another.

    Everything the State now does on the grounds correctly or incorrectly it involves Public Goods, previously were provided by private enterprise.

  • Paul Marks

    The idea that health care is a free market in the United States is indeed utterly absurd.

    What may have started out (a century or more ago) as government interventions for the benefit of the American Medical Association (a union) and so on, have now become so extreme that they benefit nobody.

    The vast government spending (half of all health spending – even before Obama) and endless regulations really do benefit no one – they hurt everyone. No one benefits – not doctors, not insurance companies, certainly not ordinary people (who were always hurt by government interventionism).

    Whether or not such things a doctor licensing (State by State a century ago) or the FDA (at Federal level) were motivated by a desire to help corrupt special interests or by a real desire to help people is beside-the-point now. As the collectivism has become so extreme that no one benefits – not “Big Business”, no one.

    So why does the statism carry and get worse and worse?

    The power of ideology.

    The spell of Plato and the rest of the Legion of Demons.

    The idea being that voluntary is bad, and force is good.

    Yes they (the Legion) have turned morality on its head.

    So that the young and idealistic are the most in favour (not the most opposed – the most in favour) of ever greater use of force and fear.

    Taxation, government spending, regulation (“do this – or ELSE…”) has been made to seem noble in the minds of the people.

    Especially the young and “educated”.

  • Paul Marks

    For what 100% government medical care (the next logical step) would be like in the United States…..

    See the “County Hospitals” run by local and State governments.

    And see the “VA” medical care for former members of the Untied States armed forces who come home crippled.

    Government health care for the whole population (rather than for a special group such as veterans) will, of course, be vastly worse.

  • staghounds

    It always makes me laugh at the ignorance of people who assert that the U, S. medical system is both awful and entirely private, and that the European” one is both perfect and “free”.

  • Rich Rostrom

    This article at NRO notes that the Koch brothers are reducing their spending on political campaigns, and suggests that this is part due to the brothers’ concerns for their business and public-relations concerns.

  • Lee Moore

    PM : The vast government spending (half of all health spending – even before Obama) and endless regulations really do benefit no one – they hurt everyone. No one benefits – not doctors, not insurance companies, certainly not ordinary people (who were always hurt by government interventionism).

    Some regulations do benefit some people. For example the regulation which requires hospitals to treat emergency patients, whether they can pay or not, certainly helps some emergency patients. Not all of those who can’t pay, obviously, as most hospitals would treat serious emergency cases voluntarily without demanding payment in advance anyway. But there must certainly be some beneficiaries of the edict. Herein lies the rhetorical difficulty with opposing socialist solutions. “Nobody benefits” is an exaggeration that even dim people can spot. The truth is less rhetorically valuable – that most people suffer from socialist solutions, including a lot of, but not all, the people who appear to be helped. The minimum wage is another clear example. Not all very low productivity workers are harmed by the minimum wage. The combination of job losses, loss of job opportunities, and higher prices will harm most. But some will cling to their jobs at higher wages and benefit. Of course when socialist madness assumes Venezuelan proportions the number of poor people who are actually helped may reach zero – the lunacy only serves to preserve the nomenklatura in place. But that is not yet quite the case for Western welfare state socialism.

    The hospital emergency treatment rule in the US underlines a point which PM certainly knows, but which is obscured by the sort of statistic he quotes – “half of all health spending.” Requiring private hospitals to provide free treatment goes down in the books as private spending on health. But in reality it is government spending, financed by a tax on the hospital. But because it is achieved by regulation, it stays out of the books. Exactly the same goes for the Obamacare cross subsidies between the healthy and those with previous conditions, achieved by regulations requiring no price discrimination. This is more off the books government spending. Even ignoring the effect of regulations as bindweed on productive activity, there is another class of regulations which serves merely to disguise government spending within private accounts, and to disguise tax as a business expense. Consequently the government share of the economy – the proportion of economic resources that it commands and directs – is considerably higher than the official statistics pretend.

  • Schrodinger's Dog

    Bob Fisher,

    People in general have never hated Bill Gates. The geeks, on the other hand did, but not because of his money. Rather, they hated him because they felt – whether this is true, I don’t know – that Microsoft used its marketing clout to force software superior to its offerings off the market. Most likely the hate has since gone away not because the Bill Gates is now giving his money to fashionable left-wing causes, but simply because Microsoft is no longer the force it once was in computing.

  • Julie near Chicago

    SD: Also, a good many of us found Mr. Gates ethically challenged in view of the way he allegedly got his MS-DOS in the first place. From this vantage point, much later, I confess I have no idea whose report to believe. For sure at least one side is full of spin, but which?

    Then the libertarian(ish) contingent moved to full-throated support of Microsoft (Gates by association) because the Feds came up with the antitrust charges.

    This in addition to the reason for disapproval that you state in your third sentence above.

    . . .

    Rich: Thanks for the link. There goes the afternoon! *g*

    . . .

    Lee: Yes. Comments from Our Side need to be very carefully examined, and if they can’t withstand assaults claiming that they’re hyperbolic or overblown, they need to include evidence proving their point; or else, re-worded so as to be less categorical.

    Unfortunately, a comment or article or speech presented this way can come over as weak or “lame” or “waffling,” especially with a little help from our non-friends in the way of spinning. And as to the first alternative, speeches and written columns that include data are apt to be off-putting to general audiences.

    (The only weblog I know of personally that gets down-and-dirty with actual data and reasoning is wattsupwiththat.com, whose audience is mostly engaged, hence more knowledgeable than the average Joe. And it includes also some who are professionals in various areas of climatology or related disciplines.)

    Yet polemics, if well done, can work. So we oughtn’t to give up … just to go very, very carefully, I guess, when we think out the style and the content of our presentations.

    Of course, no matter what we do, the Other Side is going to try to turn it into a bucket of slops. 🙁