Some loopholes I see with Objectivism

[softwareNerd]

So, are you telling me that Ayn Rand ... ...

Doug, You're mistaken about Rand's views on both these things: people involved in stocks and finance, and people who trade. Of course, if the stock-trader was gambling, that would be different; but, that's a straw-man -- in principle, gamblers go bankrupt. Edited October 1, 2009 by softwareNerd

[DougW]

A casino "contributes" to the economy the same way movie theaters, TV stations, bowling allies, etc do: by offering a service or product in exchange for money. Gambling is a form of entertainment. the only difference with most other forms is that sometimes the provider has to pay the customer.

Midas Mulligan scolds someone in a flashback in AS, telling him he'll never get rich while he thinks what Mulligan does is gambling. Do not confuse high stakes with gambling. Gambling is a game, sometimes played for high stakes, in which the result is determined by some random means. True, if you understand the odds presented by different types of bets, you stand a better chance of winning, but the result is still random.

Trading stocks, or for that matter trading commodities and futures, is NOT gambling. The outcome is not determined by chance, but rather through a complex combination of factors (one of which may be chance). Yes, sometimes high stakes are involved.

There are a handful of people who make a living out of gambling. There many thousands more, if not hundreds of thousands more, who make a living out of stock trading. the reason is quite simple: even using the best gambling strategies, thus minimizing chance, the best you can expect in the long term is to break even. The House always has an edge (thus it makes money). The best you can do is neutralize the edge and make the game even.

Those who can live by gambling either can overcome the House edge so as to make the game uneven in their favor (such as counting cards; which is a rare talent and not nearly as profitable as the movies make it seem --casinos guard against card-counters); or they play games such as poker as sport. The latter are equivalent to pro athletes in league sports, if with a smaller fan base and audience (the World Series of Poker is broadcast on sports networks).

The one sure way of making millions at gambling is to own the casino, the sports book or the racetrack.

So a stock trader is a productive person, even if he inherited the money he uses to trade stocks.

There are times when the stock market is akin to a casino: when the ignorant make "investments" in stocks hoping for a quick and very large return. Amateur hour, so to speak. It's ok to invest with a trading firm, but unless you know what you're doing you shoulnd't invest on your own. It's like flying. You go into a plane with a pilot in the cockpit, you do not attempt to fly yourself without any formal training.

Finally, there are risks in trading as there are risks in any other kind of business. A clothing designer may missjudge public tatses and wind up with a very expensive pile of what are, in essence, worthless rags. A promising oil field may be smaller than previously thought (witness the thousands of exploration wells left abandoned). Or just look at the New Coke disaster back in the 80s, or the Ford Edsel. All business is fraught with risk. But that doesn't make it gambling.

D'kian,

I don't recall the Mulligan character in AS specifically, but was he a stock speculator? If so, and Rand included him in her list of 'rationals' then I stand corrected, though I would be confused. If his business is speculating in another way, however, such as oil fields, that is totally different, as the end result is in fact to produce something 'real' (i.e. oil or gold, or coal, gas, etc.)

I still haven't read anything written by Rand herself about her opinions of pure stock speculation, but if she sees it as anything other than someone getting rich off the hard work of others I can not even begin to understand it..... If we are expected to accept that the number of 'Beatnik Poets' that ever existed who live a rational life = 0, and the number of 'Noise Composers' who live a rational life = 0, and if you dance in the modern way, jerking around on the dance floor with no purpose means your chance of living a rational life = 0, yet the number of pure stock speculators who live a rational life > 0, I really, really have to wonder....

[DougW]

Doug, You're mistaken about Rand's views on both these things: people involved in stocks and finance, and people who trade. Of course, if the stock-trader was gambling, that would be different; but, that's a straw-man -- in principle, gamblers go bankrupt.

SoftwareNerd - where is that information?....again I can't recall a single character in Atlas Shrugged or Fountainhead who made a living simply by buying something and then selling it in an unmodified form. If I am wrong, pelase tell me where the information is. My guess is if you gave these books to 1000 people to read and asked afterwards what the author would think of someone who profited from selling a product without being involved in the actual line of production (which includes financing and transportation, but not speculation or buying/selling without modifying) 990 of the people would guess that the author held these people in disdain...

And again, just to be clear, buying a company's stock at offering in order to finance the company is NOT what I'm talking about...I'm talking about buying stock from another investor, and then selling to yet another investor at a profit or loss...

Edited October 1, 2009 by DougW

[D'kian]

I don't recall the Mulligan character in AS specifically, but was he a stock speculator? If so, and Rand included him in her list of 'rationals' then I stand corrected, though I would be confused.

Ayn Rand didn't write holy writ. Some of her opinions were wrong.

That said, she used fiction to illustrate philosophical principles. The AS characters more so than others. Mulligan was, in fact, a banker. He invested in young Rearden's business when the latter was starting (through loans, I assume).

If his business is speculating in another way, however, such as oil fields, that is totally different, as the end result is in fact to produce something 'real' (i.e. oil or gold, or coal, gas, etc.)

Stock traders produce something real. I'm not the best person to explain this because my understanding of the stock market (never mind the futures amrket) is amrginal at best (no pun intended). But look at it this way:

Stocks are like currency backed by a corporations' assets, sales, market share, brand name, etc etc. If their price goes up the comapny is woth more and can obtain all sorts of benefits from increased market value. For example, it can get better terms when borrowing money from banks (many large companies take lots of loans for a variety of reasons, smallc ompanies too).

I still haven't read anything written by Rand herself about her opinions of pure stock speculation, but if she sees it as anything other than someone getting rich off the hard work of others I can not even begin to understand it.....

Maybe she knew better than to offer opinions on subjects she knew little about. If you want something close, though, Frisco d'Anconnia buys his first foundry with profits from "playing the market." He played the market as part of research in writing a thesis regarding some aspect of Aristotle's philosophy. Francisco d'Anconnia was a rich heir using his father's allowance money to invest in the market. Also Dagny Taggart owned stock from her own railroad, possibly inherited from her father.

I suggest rather than looking for Rand's opinion on the matter, or for Peikoff's opinion, you should learn more about what the stock market is and what stock traders do.

Edited to correct assorted typos

Edited October 1, 2009 by D'kian

[avgleandt]

Doug Regarding trading.

Stock market as you know is a system for effeciently allocating capital. People who buy stocks, take the money they have already produced, and buy a piece of a company with it. The company uses this money to expand productivity. If company is successfull it makes more money and thus creates more wealth, jobs, ect. The person who bought the stock is called an investor and contributed to this process by giving some of his previous accumelated productivity(money) to the company. But it seems that you understand that investors have value, you think that people who day trade produce no value and have easy jobs.

A day trader is usually called a market maker in the profession. The value they bring is basically in their name, they make markets. When a person wants to buy or sell stock he has to buy or sell it to someone else. If that someone else was not present they would not be able to make a transaction. Imagine you want to buy 40,000 shares of abc, you would have to wait until someone wants to sell 40,000 shares of abc. Luckily for you there are already market makers who have entered both a buy and a sell. The difference between the buy and sell price is called a spread. The more market makers there is in a market the smaller the spread. Which means you can buy abc for 10.01 and sell for 10.00. If you remove a good portion of market makers the spread can go up a lot. The more market makers there is the lower the ability of one person or company with a lot of money manupulating the market. As a result the value that market makers add to the stock market is more liquity less volitlity, and overall more effeciency.

As if the job is hard or easy. Wether you are trading from home or on the floor its extremly hard. It might not be hard physically but defently mentally, a lot of stress. Not many market makers come out successfull. As the saying goes, if it where easy, everybody would be doing it.

The stock market is not a zero sum game. The companies involved actually create new wealth and thats why their prices go up and why they can pay out higher dividens. What you might be talking about are options and futures contracts. These may seem as a zero sum game because whatever happens one person of the contract looses while the other one gains. However, options and futures are not invesment tools, they are risk hedging tools. Options and futures are very usefull for many different companies and people to decrease the risk of doing business. For example corn farmers can hedge the price of corn so they don't have to worry what the price of corn will be when its time for them to sell it.

[JMeganSnow]

Playing the stock market in this way has in essence become a form of legalized gambling that has almost no correlation whatever to anything valued by Objectivism. Those who are 'successful' in making money by day trading in the stock market don't work hard...they don't create jobs, they DO absolutely participate in a zero-sum-gain game, they often rely on methodologies that even the most fervent Objectivist would have problems with in order to achieve an edge in the game, from clearly illegal acts such as having inside knowledge of documents that will be released to the public and thereby influence the market, to the simple (and perfectly legal) advantage that they hold a seat on the exchange and can act on the released information faster than the 'average' investor.

Don't think to lecture me on what "the most fervent Objectivist" would and wouldn't think.

In fact, the speculators that you condemn perform a *very* important function--they rapidly disseminate information on the expected performance of stocks and redirect capital nearly instantaneously to where it is most effective. (The more fluid the capital is, the better off the market is in many respects.) The literature I have read on the subject indicates that these speculators actually serve to *subsidize* the market in many ways because most of them are just a little bit too optimistic and miss the optimal windows due to this fact.

But it's so very typical of you to assume that I'm some uniformed wide-eyed dreamer.

[softwareNerd]

My guess is if you gave these books to 1000 people to read and asked afterwards what the author would think of someone who profited from selling a product without being involved in the actual line of production (which includes financing and transportation, but not speculation or buying/selling without modifying) 990 of the people would guess that the author held these people in disdain...

I doubt it. I think you brought your own pre-conception to the book and read things into it that are not there.

[DougW]

Don't think to lecture me on what "the most fervent Objectivist" would and wouldn't think.

In fact, the speculators that you condemn perform a *very* important function--they rapidly disseminate information on the expected performance of stocks and redirect capital nearly instantaneously to where it is most effective. (The more fluid the capital is, the better off the market is in many respects.) The literature I have read on the subject indicates that these speculators actually serve to *subsidize* the market in many ways because most of them are just a little bit too optimistic and miss the optimal windows due to this fact.

But it's so very typical of you to assume that I'm some uniformed wide-eyed dreamer.

Apologies....I am not trying to assume anything about anyone... for all I know, half the people on the Forum could be intimately involved in the market, and while I am not as ignorant of it's workings as some of the posters have suggested, I am still not in any way shape or form an expert.

I also apologize if my wording is causing anger...I get excited about this kind of philosophical debate, and when I see a line of reasoning that seems so clear as to be (in my mind of course) unassailable, I probably write about it a bit too forcefully. I'm sorry.

[DougW]

Doug Regarding trading.

Stock market as you know is a system for effeciently allocating capital. People who buy stocks, take the money they have already produced, and buy a piece of a company with it. The company uses this money to expand productivity. If company is successfull it makes more money and thus creates more wealth, jobs, ect. The person who bought the stock is called an investor and contributed to this process by giving some of his previous accumelated productivity(money) to the company. But it seems that you understand that investors have value, you think that people who day trade produce no value and have easy jobs.

A day trader is usually called a market maker in the profession. The value they bring is basically in their name, they make markets. When a person wants to buy or sell stock he has to buy or sell it to someone else. If that someone else was not present they would not be able to make a transaction. Imagine you want to buy 40,000 shares of abc, you would have to wait until someone wants to sell 40,000 shares of abc. Luckily for you there are already market makers who have entered both a buy and a sell. The difference between the buy and sell price is called a spread. The more market makers there is in a market the smaller the spread. Which means you can buy abc for 10.01 and sell for 10.00. If you remove a good portion of market makers the spread can go up a lot. The more market makers there is the lower the ability of one person or company with a lot of money manupulating the market. As a result the value that market makers add to the stock market is more liquity less volitlity, and overall more effeciency.

As if the job is hard or easy. Wether you are trading from home or on the floor its extremly hard. It might not be hard physically but defently mentally, a lot of stress. Not many market makers come out successfull. As the saying goes, if it where easy, everybody would be doing it.

The stock market is not a zero sum game. The companies involved actually create new wealth and thats why their prices go up and why they can pay out higher dividens. What you might be talking about are options and futures contracts. These may seem as a zero sum game because whatever happens one person of the contract looses while the other one gains. However, options and futures are not invesment tools, they are risk hedging tools. Options and futures are very usefull for many different companies and people to decrease the risk of doing business. For example corn farmers can hedge the price of corn so they don't have to worry what the price of corn will be when its time for them to sell it.

Just to close out my side of this. I never said the stock market was a zero sum gain. I said traders who make a living day-trading are playing in a zero-sum gain game. I said this before, but there are so many posts maybe it was missed...I do understand the workings of the stock market, I worked on the Comex (which is commodities, not stock so a bit different, but....) so I already know about what triggers buys and sells and where proifit is taken. I am not condemning the stock market, or investing in corporations, or capitalism or even Objectivism or Rand as a philosopher! I am looking at a very specific aspect of the stock market (and perhaps of capitalism in general) and calling it into question. That is the aspect where a person buys something, adds no value to it and then trades it soon after for a profit. D'kian, thank you for the reference about Francisco. AS is so long it's hard to keep every plot point in memory, but you're right, by giving that little bit of Francisco's history, it seems Rand is accepting the use of intellect, market knowledge, etc. as a means to acquire weath through speculation. This just seems very weird to me.... Rand was so explosively angry about people who 'took from the system without contributing'.... I don't see how this reconciles...

If it takes a fixed amount of effort to imagine/design/produce/deliver a good or service to the market, and a person injects himself into the system without contributing to that effort, why is he not a moocher? Is it simply because he doesn't "expect" payment, but is taking some risk? Is it the risk involved in day-trading that makes it an acceptable way to make a living, or is it more like 'any method of making a living that doesn't interfere directly with the rights of others is acceptable'. Perhaps what Objectivism is saying is that if the collection of individuals that we call the market has a problem with these 'no-added-value' traders, they could simply avoid buying goods that they have 'marked up'. The choice is theirs to be freely made...

Maybe Rand would accept someone who made a living gambling (not against stacked 'house' odds where losing is inevitable, but playing games directly against other men where ultimate profit will be based upon the skill of the player...). That would seem to make sense in light of the attitude on speculation...

[DiverDad]

On the subject of what Ayn Rand would think, I believe the characters she created in Altas Shrugged offer some insight. Francisco D'Anconia made the money to buy his first company while in college by playing the New York Stock market, a fact his father was very proud of. Does not appear to indict the concept of making money in the market to me, and no her writings are not Holy Writ. The Stock market is just another vehicle to to invest, like banking, or buying a bond (viewed simplistically).

[D'kian]

Just to close out my side of this. I never said the stock market was a zero sum gain. I said traders who make a living day-trading are playing in a zero-sum gain game.

That's a fair distinction. I know very little about day trading, but I'll say this: no one forces anyone to buy or sell to day traders. If people do, it's because they see a valid reason to do so.

That is the aspect where a person buys something, adds no value to it and then trades it soon after for a profit.

I work for a company that mostly distributes food. We buy, let us say, a crate of tomatoes from a wholesaler, who bought it from a tomato farmer, and we sell it to ten different restaurants for a profit. But we do add a value to the crate: we deliver it to the customers' doors. We spare the customers the need to own delivery vans and having to make the trip to the wholesale market. We also possibly get them a better price that they would from a wholesaler having to sell almost piecemeal.

Of course we sell more than tomatoes. If it's edible and someone sells it, we will get it for you (if it's not edible, too; we sell a lot of disposable plates, aluminnum foil, etc).

I imagine day traders have a similar role. I repeat my earlier advice: look into it.

D'kian, thank you for the reference about Francisco. AS is so long it's hard to keep every plot point in memory, but you're right, by giving that little bit of Francisco's history, it seems Rand is accepting the use of intellect, market knowledge, etc. as a means to acquire weath through speculation. This just seems very weird to me.... Rand was so explosively angry about people who 'took from the system without contributing'.... I don't see how this reconciles...

The value of Rand's ideas lies in the fact that Rand could prove them against the facts of reality, not in the fact that she stated them. therefore all her statements must be checked and evaluated. As I said they are not Holy Writ.

BTW she never spoke about "contributing to the system." She spoke about productive work, meaning work that produces something of value, be it goods or services.

If you want to see her personification of the idea of a moocher, re-read the parts right after Dagny's and Hank's vacation, when the looters start to kill off Colorado. Jim Tagart "makes" money by getting the government to allow him not to pay his bondholders the money he owes them. That's mooching.

Maybe Rand would accept someone who made a living gambling (not against stacked 'house' odds where losing is inevitable, but playing games directly against other men where ultimate profit will be based upon the skill of the player...). That would seem to make sense in light of the attitude on speculation...

Again, examine the ideas.

BTW Professional gamblers are far from what people expect them to be. As I said, the only really successful pro gamblers are those who play in the big poker tournaments, because those make money from TV rights, sponsors and such. Many of the more successful pro poker players also write books about poker, mostly about strategy, and earn money from that.

Back int he 60s a college math proffessor wrote a paper analyzing blackjack. Unlike many other games of chance, blackjack is not a game of independent events (briefly, the cards remaining on deck can be deduced by keeping track of the cards played). Therefore, he theorized, it would be possible to estimate the odds as the game progressed and the odds change. Thus card-counting was born. The proffesor tested his theories against the casinos and won. He then published a book, called "Beating The Dealer," if memory serves, and panicked the casinos.

But instead of blackjack being over and done with, it became even more popular. Lots of people believed they, too, could count cards and beat the dealer.

It's not that simple. Counting the cards is hard, requires a lot of concentration and arithmetical ability, and by itslef it's almost completely worthless. You also need to know the basic blackjack strategy of when to hit, stay, split, double, etc (never buy insurance). the strategy is complex (Google The Wizard of Odds and look up blackjack) and has to be memorized as no casino will allow you to play with a copy of it in hand. And even then all you can do is get a slight edge over the House. Meaning it will take you a long time to make significant amounts of money. All the while the casinos will look at you like a bug under a microscope and throw you out if they as much as suspect you're a card-counter.

What this means is that card-coutners are few and don't make millions every weekend at every casino in the world.

Enough digression. I can talk more about this if you're interested, as I've bene doing a lot of reading and have given the matter a lot of thought. I like to gamble. I travel to Vegas every year (well, the past two years anyway), and I love to spend time, and a surprisingly small amount of money) at the video poker machines and BJ tables. Next year I expect to hit the craps tables hard. It's a pastime, and a good way to bleed off stress as part of a vacation.

[avgleandt]

Just to close out my side of this. I never said the stock market was a zero sum gain. I said traders who make a living day-trading are playing in a zero-sum gain game. I said this before, but there are so many posts maybe it was missed...I do understand the workings of the stock market, I worked on the Comex (which is commodities, not stock so a bit different, but....) so I already know about what triggers buys and sells and where proifit is taken. I am not condemning the stock market, or investing in corporations, or capitalism or even Objectivism or Rand as a philosopher! I am looking at a very specific aspect of the stock market (and perhaps of capitalism in general) and calling it into question. That is the aspect where a person buys something, adds no value to it and then trades it soon after for a profit. D'kian, thank you for the reference about Francisco. AS is so long it's hard to keep every plot point in memory, but you're right, by giving that little bit of Francisco's history, it seems Rand is accepting the use of intellect, market knowledge, etc. as a means to acquire weath through speculation. This just seems very weird to me.... Rand was so explosively angry about people who 'took from the system without contributing'.... I don't see how this reconciles...

If it takes a fixed amount of effort to imagine/design/produce/deliver a good or service to the market, and a person injects himself into the system without contributing to that effort, why is he not a moocher? Is it simply because he doesn't "expect" payment, but is taking some risk? Is it the risk involved in day-trading that makes it an acceptable way to make a living, or is it more like 'any method of making a living that doesn't interfere directly with the rights of others is acceptable'. Perhaps what Objectivism is saying is that if the collection of individuals that we call the market has a problem with these 'no-added-value' traders, they could simply avoid buying goods that they have 'marked up'. The choice is theirs to be freely made...

Maybe Rand would accept someone who made a living gambling (not against stacked 'house' odds where losing is inevitable, but playing games directly against other men where ultimate profit will be based upon the skill of the player...). That would seem to make sense in light of the attitude on speculation...

Ic. Though I would agree with you that day trading is not nearly as productive as inventing, producing ect. I believe, for the reasons I listed that it provides a value. The system/market that the day trader injects him self in, becomes more effiecient due to his actions. Every trade he makes, is a value because it enables the opposite party to make that trade. Ayn rand wouldn't call him a hero of productivity but she wouldn't categorize him as a moocher as well.

This is an aspect of the stock market not of capitalism as a whole. There is nothing that says capitalism will have a stock market and will have day traders. Capitalism is just a social system under which your individual rights are recognized and protected, as long as you don't break someone elses rights. And you are free to engage in volunatary trade/activity with anyone you wish. I guarantee that some people will engage in unproductive activity. But productive activity isn't the point nor the justification for capitalism, its just a secondary consequence, just something that happens when people are left free. The justification for capitalism is that its a system the protects individual rights, which are necesarry for human survival. Under capitalism the unproductive moochers are only sustained by your voluntary consent.

So by participating in the stock market do you voluntarly sustain moochers? If you believe so then you are free not to participate. However, I do think thats the case for the reasons I stated.

[softwareNerd]

I work for a company that mostly distributes food. We buy, let us say, a crate of tomatoes from a wholesaler, who bought it from a tomato farmer, and we sell it to ten different restaurants for a profit. But we do add a value to the crate: we deliver it to the customers' doors. We spare the customers the need to own delivery vans and having to make the trip to the wholesale market. We also possibly get them a better price that they would from a wholesaler having to sell almost piecemeal.

I imagine day traders have a similar role. I repeat my earlier advice: look into it.

Your company offers three values to your buyer. It gives him the goods:

• Where he wants it
  
• In the (smaller) quantities he wants; and,
  
• When he wants
  

The stock-trader (mostly) does the last of these (though one might say that some do the second as well).

Think of a market where buyers and sellers of tomatoes are coming along at all sorts of times either to buy or to sell tomatoes. people who make a market in a stock (including day-traders) are like folks sitting in that market and quoting prices to the buyers and sellers. When, a seller comes along the trader offers $100 for a unit of tomatoes. The only reason the seller will sell is if he thinks that price is fine with him, given his preference to wait or not to wait for a buyer who will offer a better price. The seller sells@ $100. Then, later that day a buyer comes along and the trader offers to sell to him for $110. The buyer will only buy if his evaluation tells him that the deal is a good one for him.

Now, Doug's contention is that the trader does not create value. This is false. The value the trader creates is sometimes called "time utility". he acts like a warehouse, for whatever duration he holds his stock or commodity. He allows buyers and sellers to buy and sell at a time of their choosing, while he stands ready to sell or buy at a particular price.

He actually offers more. He creates value by becoming an expert in his market. One cannot expect every corn-farmer to be an expert in world supply and demand for corn. The professional trader produces evaluations, and wins or loses depending on how right or wrong those are. This is one of the most essential values created in a modern capitalist system. Even people who regularly short-sell add value to the system, to the extent that they are correct in their evaluations.

Edited October 2, 2009 by softwareNerd

[SapereAude]

Regarding your quibble on someone who inherited wealth being involved in day trading DougW,

my point stands.. the money HAD to be MADE in the first place whether by a first generation or a fourth. So the person started with something, perhaps more than others, and is trying to increase their own wealth by investing in others who are trying to increase their wealth. What exactly is wrong with that?

First let me say, I have inherited nothing. I say this because the first attack that comes when one defends inheritence is the accusation that one has inherited something.

You seem to have a problem with inheritence. Why?

Would you prefer upon the death of the head of a family that the government confiscate all good and liquid assets to ensure a "level playing field"? (which never exists anyway).

Ayn Rand had some pretty strong words to people who resented inherited money.

If one who inherits behaves irresponsibly they lose their fortune, if they behave responsibly it grows.

The question for you, the non inheritor is- why is it any of your business?

Them inheriting it didn't stop you from inheriting it- it had nothing to do with you- it exists apart from you.

If they didn't squander it it isn't as if the money would have been yours anyway.

The point is whether they inherited it, made it from digging ditches, waiting tables or inventing something useful it is THEIR money.

It seems, and please tell me if I'm wrong, that you have a fundemental problem with the nature of private property.

[softwareNerd]

It seems, and please tell me if I'm wrong, that you have a fundemental problem with the nature of private property.

I don't know if I would call it a "fundamental" problem. It might be; I don't know. Instead of labeling it fundamental, let's try to analyse this particular objection to private property a little further.

Doug might broadly agree with Objectivists that private property is a good thing. He might agree that people should keep the wealth they earn. However, in the two examples (day-traders and heirs) he differs. He thinks these people have not earned their wealth. That looks like the point of difference. The day-trader example is factually incorrect, because they earn their wealth just as anyone else. As you pointed out, in the case of heirs, the money was earned by the original owner, and it is his to dispose off as he chooses: on wine, women or kids.

Edited October 2, 2009 by softwareNerd

[SapereAude]

I'm really not trying to bait you DougW but I'm very curious.

If you have a problem with inherited money what do you think should become of accumulated wealth when its creator dies?

There seems no correct answer I can find to that.

[DougW]

I'm really not trying to bait you DougW but I'm very curious.

If you have a problem with inherited money what do you think should become of accumulated wealth when its creator dies?

There seems no correct answer I can find to that.

Quo - man you are asking the question that has literally kept me up nights for a long period of my life. I was born and raised in Greenwich, CT, one of the wealthiest places on earth. I am the child of a poor family, for 3 generations my ancestors were servants who worked on the estates of extremely wealthy landowners. I grew up with good friends who had trust funds of $10,000,000 plus, drove brand new cars to high school and had 12 or 14 acre estates to play in. I worked from the time I was 15 (lied about my age...), and it was not unusual that some of my buddies would ask me to spot them a couple of bucks for this or that... which I didn't mind at the time, I never really even thought about there being a difference. When I was about 21, my dad was doing work on the estate of a really, really rich brokerage firm Pres., and his son met and became infatuated with my sister. There was a huge incident, my dad told my sister she wasn't allowed to talk with the son anymore, and we found out it was because the father had 'spoken' with my dad to say that it would be 'inappropriate' for his son to date the child of one of his 'workers'. I think on that day, some part of my view changed....what's odd is I really, really like (still) the brokerage guy. He was exceptionally bright, good sense of humor, politically liberal...he even got me an introduction to a good friend of his who was a Hollywood Producer at a time when I was thinking I wanted to work in the film industry. He just had one problem....he actually believed that people in his 'Class' were different than those of the working class...

So, maybe I do have an issue with inherited wealth...though I think I would say more than that, I have an issue with accumulation of any type of wealth or power when it passes the point of ridiculousness. This is one of the big questions I have about Rand's Writing/Philosophy. I kept reading and reading, waiting for the point where she would say something like: "Of course no rational person, who had already acquired enough wealth and property to sustain his life and the life of his children, and the lives of their children, and the lives of all his relatives many, many times over, would ever fail to see that the rational choice between keeping all of his money and leaving it to his heirs or using it to help those who may be less fortunate, and who are suffering, is the latter choice."

Now, before everyone goes freaking nuts on me, let me say the following:

1) Of course the person is under no obligation, of course, I get it, no one should ever be compelled, etc. etc. I agree!..... but I just listened to an audio debate where Dr. Ghate (sorry, forgot his first name) said that of course a rational being would save a drowning child as long as it wouldn't put him at severe risk or harm him in some way, and there would actually be a benefit to the rational man in this case...so, if that is true, how can the rational man think an extra coat of wax on the red Lamborghini (as opposed to the black one we only drive on weekends) should come before the extra shipment of vaccine for African children who are dropping like flies? Does the 'laziness' of their parents make them unworthy of being saved? Do we calculate only their future value in cash to the economy (they'll probably never earn more than a few thou...so let 'em die?)

2) I would not presume to decide where the limit is that a man should feel 'secure' about his future and those he loves. I understand this is a tricky issue. However, as I mentioned in an earlier post, I had the 'fortune/misfortune' in my life of dealing with a few very, very, very rich people, like Vince McMahon, Donald Trump, Lou Gerstner, Thomas Watson III, and a few others, and really, I never saw one minute where they weren't calculating how they could derive personal gain out of every situation.

So, my real questions about Objectivism all center around these areas:

Is there ANY amount of wealth a person can have where additional accumulation becomes so trivial that it becomes irrational to not use it instead to help others?

Is ANY giving to those who suffer, or are less fortunate in their circumstances ever acceptable? The only area I ever saw Rand address here was 'disasters' like earthquakes, floods, etc.. But what about young children born into poverty, perhaps with no parents, or a parent so broken they could never provide the necessities to help that child live rationally? Do they inherit the sins of their parents? Is it never 'in one's own best interest' to help them become educated, rational beings?

In a system designed to allow the wealthy to make great use of the advantages of their birth (i.e. the capital they start with, the better education they will receive, the benefits of social nepotism in hiring, finnce, etc.), how and why do we believe that this system will vary in any way from the European Fuedal systems of the past, other than to replace 'military power' with 'economic 'power'?

and finally: In so much of Rand's work, she specifies that every aspect of her philosophy is the ONLY answer, and that to be rational a being must follow the code she lays out at all times, that any deviation from the plan should be called out immediately, that believers should refuse in any way to participate in activities that do not follow this doctrine to the letter....yet there are inconsistencies within the works themselves, and here on the forum people say things like "Rand's word's aren’t holy writ...". What are the real beliefs of Objectivists? Is Rand 100% right, or just partly, because there's a part of me that keeps thinking 'if you reject any of what Rand says, you almost have to reject it all because she is so vitriolic in her opposition to anyone who deviates'...

Anyway, I have a plane to catch, so I'm out....thanks again for the discussion.... it's really enlightening...

[D'kian]

Is there ANY amount of wealth a person can have where additional accumulation becomes so trivial that it becomes irrational to not use it instead to help others?

The answer is there is no moral obligation to help other people, whether you're rich or not.

Is ANY giving to those who suffer, or are less fortunate in their circumstances ever acceptable?

Yes, of course. Whenever you want to and can afford to do so.

The only area I ever saw Rand address here was 'disasters' like earthquakes, floods, etc.. But what about young children born into poverty, perhaps with no parents, or a parent so broken they could never provide the necessities to help that child live rationally? Do they inherit the sins of their parents? Is it never 'in one's own best interest' to help them become educated, rational beings?

Is someone tying your hands or holding a gun to your head to prevent you from helping poor children? What you do with your money is entirely your business as long as you don't violate anyone else's rights. I ask this way because someone is holding a gun to my head forcing me to "help others."

In a system designed to allow the wealthy to make great use of the advantages of their birth (i.e. the capital they start with, the better education they will receive, the benefits of social nepotism in hiring, finnce, etc.), how and why do we believe that this system will vary in any way from the European Fuedal systems of the past, other than to replace 'military power' with 'economic 'power'?

Look at every free or semi-free country in the world and you'll find lots of people who've raised themselves out of poverty, in some cases all the way up to the wealthiest levels of society. So long as there are no laws blocking financial advancement, things will be fair. Hell, my grandfather arrived to Mexico in the 20s, even then a corrupt kleptocracy, but semi-free, with very little money, yet he managed to set up a business, raise five children and even put two of them through college.

One of the rotating quotes in the forum says something that poverty is not cause by an uneven distribution of wealth, but by an uneven distribution of capitalism. That sums it up well.

and finally: In so much of Rand's work, she specifies that every aspect of her philosophy is the ONLY answer, and that to be rational a being must follow the code she lays out at all times, that any deviation from the plan should be called out immediately, that believers should refuse in any way to participate in activities that do not follow this doctrine to the letter....yet there are inconsistencies within the works themselves, and here on the forum people say things like "Rand's word's aren’t holy writ...".

I'll say it a third time: Ayn Rand did not write Holy Writ. Her ideas are not right because theya re hers, but because they conform to the facts of reality.

The reason you're way off on this is because you ascribe to rand words and ideas she never uttered.

You seem to be having trouble with the idea of the sanction of the victim. A lot of people in the forum do (read the current controversy on Glenn beck). Rand never said, nor menat, that Objectivists should never, ever, for any reason, even give the time fo day to anyone who doesn't follow Objectivism to the letter. Take the Glenn Beck show. If he offers a plattform and allows a fair hearing to any idea, that's fine. he doeasn't have to agree with Objectivism or even like it. If, on the other hand, he were to doctor interviews and missrepresent one's ideas, then you shoulnd't pretend he gives you a fair hearing, you should not give him your moral sanction by trying to twist reality to his liking.

[RationalBiker]

So, maybe I do have an issue with inherited wealth...though I think I would say more than that, I have an issue with accumulation of any type of wealth or power when it passes the point of ridiculousness.

Fortunately volumes of wealth or power are not measured by ridiculousness. You have nothing to worry about anymore. However, if I'm wrong and you have an objective scale by which to determine when a person has acquired "too much" money or power, I'll be glad to take a look at it.

Seriously, why would you concern yourself with what the other guy has as long as he has not violated anyone else's rights in the acquisition of that power or wealth? Why not spend that time more constructively and figure out how you can acquire the wealth you need, or if it is important to you, how you can acquire the wealth necessary to help people you value without trying to take it from the next guy (or in other words, by using your own productive ability to provide something of value to others)?

My experience has generally showed me that anyone worried about what the other has wants to take something from that guy because they have somehow decided that the other guy has "too much". This is just a form of second-handedness.

Edited October 2, 2009 by RationalBiker

[RationalBiker]

However, in the two examples (day-traders and heirs) he differs. He thinks these people have not earned their wealth. That looks like the point of difference. The day-trader example is factually incorrect, because they earn their wealth just as anyone else. As you pointed out, in the case of heirs, the money was earned by the original owner, and it is his to dispose off as he chooses: on wine, women or kids.

Even if he were correct, it does not matter if the earned the money or not; that is simply a moral evaluation of how they acquired their wealth. As long as their job did not violate anyone else's rights, they can immorally earn money all day long as long as people are willing to trade with them. There should not be any precedent set in taking away money from someone just because their method of acquisition was immoral. (I realize you are not suggesting such sN)

Sure, he can still "have a problem with it", as long he doesn't try to take that money from the guy through force or law.

[DougW]

Even if he were correct, it does not matter if the earned the money or not; that is simply a moral evaluation of how they acquired their wealth. As long as their job did not violate anyone else's rights, they can immorally earn money all day long as long as people are willing to trade with them. There should not be any precedent set in taking away money from someone just because their method of acquisition was immoral. (I realize you are not suggesting such sN)

Sure, he can still "have a problem with it", as long he doesn't try to take that money from the guy through force or law.

I'm not sure why everyone on the forum always seems to ignore the base questions I ask, and instead answer only the lead-ups, or sometimes answer questions I never asked. Being able to state a truth contained in a doctrine does not make the doctrine correct, or make all proclamations of the doctrine true. I never stated that inherited wealth is morally bad, I said I probably have some problems with it because of my upbringing, because I experienced many people acting very badly who had inherited wealth, and very few, really almost no people acting rationaly who had inherited wealth. My opinion is clearly biased by my experiences, but there is certainly no inherent immorality to leaving wealth to heirs.

What I did ask was this. How is the concept of inheriting wealth different from the European Fuedal System? And let me point out that in that system, a person could have become a soldier, worked his way up through the ranks, by force of arms, charisma, etc. could have taken command of a armed band, overthrown the local duke or lord, and moved himself into a position of power. Much like a child born today in the slums of Calcutta trying to become a wealthy person, he would have needed exceptional will and ability to be able to accomplish it. The primary difference between that society and ours is that we have substituted Intellectual and Economic Power for Force of Arms. Now, is there some inherent value to intelligence that makes it more 'moral' or rational than strength. We could have a 50 page discussion on that one...

I think every one of us always need to keep asking questions about the 'system' we are applying to our lives, and one very important question we need to keep asking is: 'Do I think something is moral because it produces good results for me and my kind, or is it moral for everyone?' One of the main arguments that Rand keeps stating for Objectivism is that is is the only reason-based philosophy. If that it so, then it is important to explain the reason behind acceptance of the disparity of the starting point in which each man enters the equation. Why is it reasonable that two men of equal intellect, will and moral resolve could have such dramatically different opening positions in their life that the first has an easy ride to success, where the other is almost doomed to failure. (And NO, I'm not saying it is anyone's fault, so please, please, please don't post that the wealthy have no obligation....yeesh I get that already!)

So, the real key to this thought process is to then take the next step. If the people who have the wealth are rational, IF....IF they are rational, how can they then choose to continue the perpetuation of this system. NO THEY ARE NOT OBLIGATED!!!! But, which choice is more rational? Just answer that.... more rational to continue leveraging wealth to heirs who may or may not be rational beings, even when that wealth amounts to 10,000 lifetime's worth of resources, or more rational to help those who suffer and want for no reason other than chance of birth? Not the 'lazy'....not 'moochers'....not 'beatnik poets' even.... Have we convinced ourselves that there are none out there worthy of assistance when weighed against having HBO on the TV in the pool house? That the rational choice between a first class upgrade and a school in Somalia is the upgrade? And one more time...you have no obligation.... I just want to hear you say that you have looked at the facts, have weighed the values involved, and have rationally decided that moving from 49th to 48th on the Forbes list is more rational than using the wealth to help others have a chance at a rational life....

...and RationalBiker, I wasn't really singling you out as the reply here, yours was just the bottom of the stack.

Edited October 3, 2009 by DougW

[kainscalia]

Doug, listen to Dr. Diana Hsieh's podcast, she touches upon the subject of inheritance and perhaps you might find something enlightening in her reply:

http://dianahsieh.podbean.com/2009/09/15/e...rnal-conflicts/

What I did ask was this. How is the concept of inheriting wealth different from the European Fuedal System?

[Thomas M. Miovas Jr.]

In a capitalistic system, having wealth does not give you political power or military power, so it is not like the feudal system that Europe had. Bill Gates having billions of personal savings doesn't give him any political power -- he still only has one vote. He doesn't have the ability to buy senators unless they are corrupt, and under capitalism they wouldn't have any power over him so there would be no need to buy a senator for special privileges anyhow.

And helping others out is optional, according to your own value hierarchy. Not only is there no moral obligation to help them out under a rational morality, it is actually immoral to give out money indiscriminately. Somalia and other countries like that are in such poor shape because they don't have capitalism. Under capitalism, the United States was carved out of a wilderness, we didn't become wealthy because it was given to us, it was created.

Objectivism rejects altruism in all of its forms, and has no proposition to help out others as a moral requirement. A man who earns great wealth is moral to use it for his and only his purpose. Rational selfishness is good; throwing away one's money is not good.

I think you need to read or re-read Atlas Shrugged to get a better grasp of what Objectivism is all about and why altruism is evil.

[Eiuol]

"If that it so, then it is important to explain the reason behind acceptance of the disparity of the starting point in which each man enters the equation."

Not everyone is equal. They are only born equal in the sense no one has any more or less rights than another. Accept what you have and make the most of it. If you are lacking something because of a result of *force*, then it would be a good idea to bring any rights violators to justice. If you think a person deserves more of something, than give them more. Provided you don't steal from others (tax) to do so. Whether or not helping a person is rational is up to you and dependent on your values. Helping a person *just* because they're not as well off is not rational.

[SapereAude]

It seems from reading your post about your family being laborers for a very rich man and the incident with the son not being allowed to date your sister that you have a great deal of envy and jealousy to work out before you can come to rational conclusions regarding private property DougW. I mean that with no scorn or malice.

You brought up the notion of the choice of rich man to either have his fancy car waxed or give to someone in need.

Lets take that.

Lets look socratically at what having his car waxed entails.

It entails many people being employed. The makers of the wax, the seller of the wax to the shop, the landlord of the property the shop is on, the owner of the shop, the employees of the shop, the papers that the shop advertises in, all the people that are employed due to the purchasing power that these jobs provide.

Or. You can just give one person $100 (a random number I picked out having never owned a fancy car or had any car waxed).

Looking at this logically, rationally, it seems clear that much more good is being done in the first instance.

Only in the first instance is value for value is being traded. Every person involved is a free agent giving value for value.

When you spend money in a value for value manner you create freedom and wealth.

Mindless slaves are created under any other system.

You reference a notion that passed down wealth resmbles feudalism. Not so. Passed down wealth can be easily lost, even vast amounts of it. It needs some form of attention, stewardship and responsibilty. Whereas unearned nobility stays regardless as has nothing to do with assets or productivity. Look up how many impoverished nobilty you have mncing about Europe.

Our society teaches us to envy rather than achieve, never more so than in our current situation.

Your father's boss giving away even a quarter of his fortune would not have changed your life or your family's situation in anyway- unless of course you are willing to admit to yourself that part of you thinks you should have been the recipient of some of this charity. There is no shame in admitting that to yourself, children think that way. But you are an adult now and it is time to put away childish things.

Realise that a change in your father's bosses fortune would still have absolutely nothing to do with you.

Excepting of course a complete loss of his fortune which would have left you not only resentful but the son of an unemployed man.

Are many rich men assholes? Yes. And many poor men are assholes too. And many middle class men.

The point is the monies of the rich, the poor and the middle class are not your affair. Your money is your affair. If you have enough and are inclined to do so you can do all the "good" you want with your resources.

Envy of wealth is like envy of physical beauty. Making a beautiful woman ugly will not make you pretty.

Read also, along with Ayn Rand The Road to Serfdom by Friedrich Hayek.