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Re: Saving habits, gov't taxes [was: Self-Responsibility, luck, experience]

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  • Paul Wakfer
    I apologize for the belated reply --Paul ... I think that the two go together. Cradle-to-grave socialism removes incentive because there is far less need to
    Message 1 of 24 , Jul 6, 2008
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      I apologize for the belated reply --Paul

      On 04/22/2008 01:08 AM, Steve Floyd Jr wrote:
      > --- In morelife@yahoogroups.com, Kitty Antonik Wakfer <kitty@...>
      > wrote:
      >
      >> Steve Floyd Jr wrote:
      >>
      >>> --- In morelife@yahoogroups.com, Paul Wakfer <paul@> wrote:
      >>>
      >>>
      >>>> Steve Floyd Jr wrote:
      >>>>
      >>
      >> [snip of previous items responded to separately by Paul]
      >>
      >>
      >>>> [What has gone by the wayside since I was a child is the idea
      >>>> of "saving for a rainy day" - those events that most
      >>>> likely would occur, like illnesses. Insurance was only
      >>>> for something very unlikely, but not impossible.
      >>>> the exception for many people was the idea of buying life
      >>>> insurance - death was/is a certainty at some point as the
      >>>> way of providing for their young families before sufficient
      >>>> savings could be accumulated and mortgages on homes fully
      >>>> paid off. Now health care insurance is really nothing more than
      >>>> prepaid health services but done in a pool method where everyone
      >>>> shares the financial burden for each other's health status. And
      >>>> life insurance is a poor longterm investment alternative for
      >>>> the person who has an income in excess of necessary
      >>>> expenditures. **Kitty]
      >>>>
      >>>>
      >>> Kitty, I agree with you entirely here. It is quite frustrating
      >>> to me that most of my peers believe that any extra money in the
      >>> bank is to be spent on entertainment. They simply do not
      >>> understand that bad things can happen to them, and they are not
      >>> prepared for these occurrences. My general feeling on your
      >>> last few sentences above is that people are uneducated on the
      >>> alternatives. I mean alternatives such as disease-prevention
      >>> through healthy habits, and alternative investment vehicles
      >>> outside of life insurance. Some people simply opt to take what
      >>> is presented to them (the life-insurance salesperson comes by and
      >>> they buy it).
      >>>
      >> My conclusion is that the vast majority of people who do not
      >> save/invest part of their income and instead spend all of it on
      >> possessions and services of various types because they currently
      >> have no incentive to do otherwise.
      >>
      >
      > I find it your conclusion here interesting: that people do not do so
      > because they have no incentive to. My present conclusion is related
      > to this. That is, my conclusion is that the vast majority of people
      > are not aware of the incentives involved in "doing otherwise". So,
      > my conclusion is that people do not use their resources more wisely
      > because of a lack of awareness and education, rather than a lack of
      > incentive.

      I think that the two go together. Cradle-to-grave socialism removes
      incentive because there is far less need to plan for one's own future
      benefit. But at the same time, since governments increasingly take
      care of all one's needs (with money stolen from others), there is no
      need for awareness or education about how to think and choose long
      range in order to benefit oneself.

      > During my multiple analyses of the possibilities of my
      > future financial condition, I realized that there are many, many
      > incentives related to delayed gratification, most notably the idea
      > that saving now can have a very dramatic effect on my financial
      > wealth in the future. In my experience in attempting to communicate
      > these incentives to saving to others I have found that nearly all of
      > the people I spoke with are totally ignorant of important financial
      > planning fundamentals (i.e. compound interest, investment vehicles,
      > reduction of expenses to maximize savings, etc). I have also found
      > that once they become aware of these benefits that can be realized in
      > the future they seem much more interested and/or motivated to engage
      > in different behavior (i.e. spending less and saving more). Note
      > here that I may be incorrectly alternating between the use of the
      > terms "incentive" and "benefit". That is, I'm not sure what you
      > mean by your use of the word "incentive".

      By "incentive" I and Kitty mean a stimulus or motivation to do
      something. There is a subtle but important difference between
      incentive and benefit. Benefit is the intended result of acting.
      Gaining benefit is the incentive (and purpose) for acting. Note that
      an action intending to gain benefit may not actually do so, but even
      so, the incentive/purpose has not changed. However, purpose and
      incentive are also subtly different. A purpose is the intended end
      result, while an incentive may be only one item which appears to make
      that purpose more likely to be realized.


      >> It wasn't that many years ago that the fable of the
      >> grasshopper and the ant had real relevance to society - that if an
      >> individual chose to spend/use all of his assets (including time)
      >> during the present, then s/he would have accumulated nothing for
      >> the inevitable winter and the fates (likely death) would prevail.
      >> Is this a fable with which you are even familiar?
      >>
      >
      > I am not familiar with this tale, but I certainly think it is
      > relevant to our discussion here. But your decription above makes me
      > wonder about the causes of the change in attitude in society. I
      > studied business in college and I note that the study of business is
      > the focus on the sale of products and services to others for profit.
      > Included in the study of business is the disciplines related to the
      > communication of features and benefits of a product or service, and
      > the techniques related to convincing a person to make a purchase
      > (marketing and sales respectively). I wonder if there is an
      > increased emphasis on *profits* from the time you mention "not that
      > many years ago" to the present.

      I think that there has been a change during the last several decades
      in the understanding of the meaning and purpose of profit. Several
      decades ago, not nearly as many people as today took the view that
      profit is simply a necessary evil required to keep businesses
      producing the goods and services that everyone requires. Decades ago
      more educated people understood that profit is necessary for any
      social transaction to occur, since it is nothing but the net benefit
      that each party gets out of the transaction and thus, is the incentive
      for each to enter into the exchange of value.

      [If you haven't already done a search on the Web for it, here is a
      site with a rendering of the fable, unchanged from how I remember it -
      http://www.umass.edu/aesop/content.php?n=0&i=1 **Kitty]

      > I also wonder if corporations, with their
      > emphasis on marketing, sales, (and seemingly materialism) might
      > partly be to blame for society's seeming current lack of reasonable
      > behavior regarding one's resources.

      Since all corporations and businesses in general, have always had this
      emphasis (because material profit is the only benefit that they know
      how to measure), I do not see that they are to blame for the change.
      Rather I think that it is philosophically based. While explicit
      socialist practices have largely been shown to simply not work,
      nevertheless, the socialist ideals behind those practices were not
      seen to be invalid for reality (which is why the practical application
      of them did not work), but rather continue to be admired, sought and
      implemented by other far less direct and clearly negative means. So
      in the end these negative altruistic and socialist ideas are winning
      over the majority of people and being increasingly instituted by all
      levels of government everywhere.

      >> [Steve, have you never heard of "the school of hard knocks"?
      >>
      >
      > I am fairly familiar with this term. In fact, I try to get the most
      > out of this "university" as I can! :) (That is, when there is not a
      > better alternative).

      Actually for some things there *is* no better alternative. Imagining a
      "hard knock" as the result of some action, is never as effective in
      training one as actually getting hard knocked after taking the action.

      >> By far the most effective method of learning about reality occurs
      >> when a person is allowed to suffer the real and often hard
      >> concequences of hir actions. "Reality is the best teacher" is another
      >> maxim used in this regard. The problem with current society is that
      >> reality is not allowed to be a teacher to any except those who are
      >> productive and get their hard earned assets stolen by governments. -- Paul]
      >>
      >
      > I am not sure that government theft of assets of productive people
      > are the only thing that is allowed to be taught by reality.

      Since I cannot understand the relevance of your statement above, I
      think that you misunderstood what I said above. Here it is again
      stated differently.

      The problem with current society is that, except for those individuals
      who are productive and get their hard earned assets stolen by
      governments (government is a major part of the current reality), most
      people are prevented learning from the negative effects of reality
      (because of the existence of government "safety-net" programs).
      Actually it is also true that most people are not able to learn from
      the positive effects of reality, since a great deal of the value that
      they would have earned by their responsible and valuable endeavors is
      stolen or subverted by government in one way or the other. (An example
      of that is that your various financial planning methods are not nearly
      as effective as they might be, because of all the government
      regulations and taxes.)

      > However, I do agree with your assertion that society seems to be more
      > sheltered from reality, especially with things like television, video
      > games, political correctness, etc.
      >
      >
      >> There has been an enormous increase in the past 30 to 40 years of
      >> what began in the 1930s - payment through tax money to people for
      >> all types of avoidable situations. Tax money-backed health care is
      >> just one of many provided services that were/are labeled by
      >> politicians as part of a caring society.
      >>
      >
      > Note that since your and (I believe Paul's) recommendation to read
      > Mises.org I have signed up for the Daily Mises Article. After
      > reading most of these articles, (and then more on the website), I
      > have become increasingly frustrated with the above situation you
      > describe. More specifically, where you state:
      >
      > "Tax money-backed health care is just one of many provided services
      > that were/are labeled by politicians as part of a caring society."
      >
      > ...especially frustrates me. Where you say "caring" above I would
      > rather call it *irresponsible*.

      "Caring" is not our term, but rather the word used by politicians and
      altruists ("labeled by politicians"). They have distorted the word
      from its proper application to individuals, and applied it to the
      collective society as a whole where it is not meaningful. Society
      cannot care, no more than society can think.

      > The more I learn the more I notice
      > that so many problems in society seem to be connected to
      > irresponsible behavior.

      This is true, but it is important to understand why irresponsible
      behavior exists (what is its incentive), rather than merely *that* it
      exists. If you do not do something about the why (the incentive) then
      all your efforts to correct the fact of its existence will be in vain.
      Briefly once again, the incentive for irresponsible behavior is that
      it is the easier course of action when there is little disbenefit
      involved with it - most of the disbenefit having been eliminated by
      government programs.

      > Some of these problems include financial
      > problems, unplanned pregnancy, and health problems (i.e. the so-
      > called "obesity epidemic" - boy I wouldn't want to catch that
      > disease LOL).

      The disincentives for being responsible with respect to all of those
      examples is that everyone is taught from day one that such negative
      occurrences are largely unpreventable and there are government
      programs to help you out with all such negative occurrences - so why
      bother to try to prevent them, just take the easy way and spend all
      your money, have sex with wild abandon and eat all the junk that you
      want. Do all these things to get as much immediate gratification as
      you can, since you need not be concerned with any negative results.

      [What amazes me is that, in all the public (political) debates on
      costs, no one says the above - not even in the fringes of mainstream
      media. Actually it doesn't surprise me that no politician wants to
      acknowledge this truth because if it were the reigning philosophy
      s/he'd have lost a major tool for getting/retaining hir power. **Kitty]

      > But again, I think that much of this irresponsibility comes from a
      > lack of education - from parents, from peers, from schools, and from
      > every other member of society.

      But once again, the lack of education is because a society in which
      irresponsibility appears to be rewarded eliminates the need for
      teaching and learning it.

      >> Another is unemployment. Now losing one's current job
      >> may not be avoidable - companies can go into a reduction of force
      >> mode and even out of business - but being without any income *is*
      >> avoidable. That once common "rainy day fund" was also thought of
      >> as "tide over" money, in case of job loss, to be used for that
      >> short period of time until the individual established another
      >> source of income - another employer or his own endeavors as a
      >> provider of a product or services willing to be bought by others.
      >> This is rarely done anymore and it is common to read or hear about
      >> persons who have been on unemployment benefits (government paid
      >> from tax money) for more than a year - or the person files for and
      >> receives a grant from one of many government agencies and/or
      >> declares personal bankruptcy. The original idea of government
      >> sponsored unemployment insurance was that money was to be
      >> withheld from a person's paycheck, invested in some trust and
      >> then paid out for a specific period of time to those who became
      >> unemployed through no fault of their own - something that could be
      >> arranged by the individual and employer on a voluntary basis.
      >> Unfortunately government has preempted this type of voluntary
      >> arrangement or the decision of the individual to do his own savings
      >> for such an event by its mandatory federal program.
      >>
      >
      > Interesting discussion Kitty. Related to this, I just lectured today
      > in my Accounting 1 class about FUTA and SUTA taxes (federal and state
      > unemployment tax acts, respectively). One thing I emphasize in the
      > lecture is that only the EMPLOYER pays these taxes - it is *not*
      > withheld from the EMPLOYEE, even though it's the employee that
      > receives the benefit.

      I hope that you point out that even though the employer pays it, it is
      at least partly still indirectly taken from the pay of the employee,
      which pay could be higher (and the prices of the company's goods or
      services lower) if the employer did not have to pay the unemployment tax.

      > I love to see the puzzled or frustrated looks
      > on the students' faces when they realize this contradiction. My
      > classes (2 sections) today had several heated discussions about the
      > taxes the government takes from paychecks and I encouraged all of
      > them to become more active. I encouraged them that, while the tax
      > situation is frustrating, changing the situation is up to them and
      > without acting to change the situation they are consenting to it. I
      > think that some students may have been inspired by my words.

      While it sounds good and does help activate people, the logic of the
      statement "If you do not act to change a situation then you are
      consenting to it" is faulty. All that is necessary to not consent to
      some action A that is affecting you is to clearly state: "I do not
      consent to A". Logically it is not necessary to do anything else.
      However in practical terms, some action (generally more than merely
      saying: "I do not consent to A") will be necessary in order to
      eliminate A. Therefore in order to avoid this logical fallacy, I
      suggest that you rephrase it as: "taking positive actions is the only
      practical and effective way to communicate to others the strength of
      your non-consent - it is the only way for others to know for sure that
      you do not consent".

      > Note that I plan to respond to the remainder of your comments in
      > message 1719 at a later time.
      >
      > Also note that I spent a significant portion of time formatting the
      > previous comments in this message for easier reading by the group.
      > After spending time formatting this message I wonder if there exists
      > a more efficient way to post and reply to messages of this type.

      The only better way that I know of is to preemptively place hard
      returns at end of every line of about 65 characters. I have done that
      in this response message.

      > Have the moderators considered the use of a forum/discussion board
      > format?

      Yes, but we have not seen one that is inexpensive, enables us to
      prevent people posting without full identification and also enables us
      to moderate each message before it is posted to the group. Besides,
      the Yahoo reply format automatically enables and promotes inline
      response, which I and Kitty are convinced is a necessity for rational
      and complete discussion.

      > I think this format might simulate a conversation better
      > than the current format.

      Since I cannot see why this would be the case (and I can see many
      negatives of most forum/discussion board formats that I have
      reviewed), you will need to explain in detail why you think that.

      --Paul
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