Quote of the week...please share your favourite line from Ayn Rand's writings

“Happiness is that state of consciousness which proceeds from the achievement of one's values.”

Monday, November 8, 2010

The "Giving Pledge"

The “giving pledge” of Warren Buffett and Bill Gates was signed by 40 of the wealthiest Americans. Gates and Buffett have asked the wealthiest to give up half of their wealth for philanthropic causes. Strangely, many complied and many more are like to, in coming days. Don Watkins and Yaron Brook of the Ayn Rand Institute has called it the “guilt pledge’ in Forbes. “Charity is not a primary virtue”, said Ayn Rand.

We are usually reminded that we could wipe out poverty if only we would be willing to sacrifice a little more. “What good would it do, for a corporate CEO to have one more private jet?” they ask. An overwhelming majority of world’s population lives in near starvation. Any sane, intelligent person can look upon this fact and pass his judgment that charity, definitely, isn’t a solution to this problem. How are we supposed to deal with a problem of this scale through sacrifices? When they say sacrifices are to be made out of profits, they ignore the basic economic fact that every penny given to charity is taken out of what would have been employed in capital investment or personal luxury.

Charity is, needless to mention, a virtue on a free, uncontrolled, unregulated economy if exercised in the right manner. Not for a single moment is anyone saying that we shouldn’t help men thrown into poverty by no fault of their own, but we should know what makes and keeps them poor. It would certainly be argued that their problems need immediate attention, and few have anything to say against it. What is to be said against it is that ‘charity’ or welfare state as a policy would only exacerbate their problems. Even if all the richest men on the earth try to cure poverty through charity, they won’t reach anywhere close to it, as the poor are too much for them to take care of.

We now see the richest men on earth running around like Santa Clauses, which forces me to believe that they do really believe what they preach. At least on a conscious level, they do, otherwise they wouldn’t have been willing to spend their hard earned money that way. We get to one more reason why a libertarian education is essential for each and every man on earth. It would relieve the rich of their guilt and the neurotics of their inferiority complex. Alienation and scapegoating has a lot to do with it.


  1. Yes. Ayn Rand once wrote to the effect that capitalism (which would consist of wealth creation, enterpreneurship, freedom of choice and the market economy) and altruism (comprising selflessness, moral guilt and lack of personal identity)cannot co-exist in the same person or the same society. We are seeing this in practice.Unfortunately 43 years after Atlas Shrugged, 99 percent of the people including business leaders do not understand this issue. This is the crux of the problem.

  2. The residual morality of religion combined with a split psychology (brilliant in some areas of life but not so intelligent in other areas) and the overriding need for moral approval from 'others' seems to be the root cause of this phenomenon. This bodes ill for the ethics and politics of individualism and capitalism which alone can have any longterm and sustainable remedy for poverty. Instead it is likely to encourage more efforts at socialism and welfarestatism, with all its attendant adverse consequences.

  3. Well... rand's a philosopher not an economist. Try reading the likes of keynes and you'll understand a few things. Investment generates an amount of savings equivalent to itself, not the other way around as is assumed by classicists, neo classicals and monetarists. Taxation of profits does not lead to reduction in investment, investment decisions are autonomous, inequality in society arises due to the existing patter of ownership of resources, not because of inherent superiorities in abilities of people.keynes/kaecki or even krugman (these days) they all know the truth, discover it by following what these ppl have written, do not confuse philosophy and ideology with economics, or we will head towards disaster aboard the tea party express!

  4. How are savings generated by investments? It is saving that comes prior to investment. If and only there is a surplus in the economic activity, can one do an investment. However, it is not surprising to see this thought process in someone who reduces the context to todays fractional reserve banking banking system & paper\fiat currency system. This means that the central bank can create new money to support investment. However, this is not new wealth or surplus that is getting invester, but only an additional claim on the existing surplus. The central bank and the governments will be able to carry this for a limited period, till the time the people who generate the real savings realise & start feeling the impact of this claim and from that moment, there is a progressive realignment of illusionary wealth to the real wealth & this is achived through inflation. Economist like Krugman and Keynes have consistently proposed interventions in the market that have solutions that are at best temporal in nature. And as usual, like every intervention creates un-intented consequences, there will be need for more interevnetions. The Krugmans & Keynes are like surgeons, who recommend a massive surgery, without allowing the economy to heal naturally. The only problem is that the economy keeps coming back again & again to the surgeons table, till one day it completely looses its ability to recover itself, that natural ability in a living & thriving organism to heal itself.

  5. investment generates savings equal to itself.This is basic macroeconomics.(I hope you understand paradox of thrift). Go back to kalecki's two sector model:
    Department 1- capital goods
    Department 2- consumption goods
    i assume you understand total ouput of dept1 (Q1)= p1 + w1 (profits plus wages)
    total output of dept2 (Q2)= p2 + w2
    p2=w2 (output must be realised, i.e, sold)
    Now introduce investment (I1). Dept 1 expands. There must be corresponding increase in output of dept 2 to meet the demand of new workers employed in dept 1. This leads to expansion of dept 2.... therefore p2 rises. with the classical savings assumption in place, we have greater profits, greater savings because of greater investment. AND also greater aggregate demand.
    On the other hand, with nominal rates of interest already close to zero in US at present, investment is still not taking place... and further we curtail demand by "saving", the worse the situation will get.
    See this article by a brilliant professor in India: http://www.networkideas.org/featart/jan2010/Prabhat_Patnaik.pdf
    As for the economy coming back again and again to the "surgeon's table"... try looking at the revolutionary content of keynes general theory. And you will know that the ultimate once and for all solution lies in Marx!!!!