Harris on Hoarding

Sam Harris thinks some people are too rich. Elliot Temple has already criticised this essay, but I want to pick up on one issue. Harris writes stuff like this:

Happily, not all billionaires are content to hoard their money in silence.

and this:

But even in the ideal case, where obvious value has been created, how much wealth can one person be allowed to keep? A trillion dollars? Ten trillion? (Fifty trillion is the current GDP of Earth.) Granted, there will be some limit to how fully wealth can concentrate in any society, for the richest possible person must still spend money on something, thereby spreading wealth to others. But there is nothing to prevent the ultra rich from cooking all their meals at home, using vegetables grown in their own gardens, and investing the majority of their assets in China.

Let’s suppose that a person chooses to keep a very large amount of cash. Why does that matter? Let’s say this person takes $1 billion, buries it in his backyard in a locked chest and then flushes the key down the toilet. What will happen? There will be less money. Since there is less money consumers may decide to spend less on goods and services. The people providing those goods and services will then have to charge less, but the price of other stuff will fall too. The composition of the goods being bought will change too since the hoarder is buying less stuff. So there will be fewer orders for the items the hoarder would buy and this may have consequences for how much of that item gets made. But this is all business as usual – if customers don’t want X then don’t make it.

The amount of money in circulation isn’t important. What matters for your life isn’t having money per se. What you actually want is command over the resources you can buy with the money. What makes people better off is more stuff.

In reality, rich people don’t bury a load of money in their backyards cuz they’re not idiots. Rather, they invest money and keep some cash on hand in case they should need it. Under some circumstances, a person may choose to keep more cash. For example, if a person thinks the government may start coming after him for more taxes, he may keep more cash so he can spend it quickly on items that won’t be taxed. Harris advocates taxing rich people heavily. So Harris’s writings on rich people may help bring about the problem he fears.

Harris doesn’t mention any of these problems with his position because he doesn’t know about them. Would he start talking smack about quantum mechanics without knowing anything about it? No. He would think that’s stupid. But somehow he decided it wasn’t necessary to learn economics. Don’t act irrationally like Sam Harris, learn something about how markets work before you say stuff about economics.

Capitalism by George Reisman

The theory of money and credit by Ludwig von Mises

About conjecturesandrefutations
My name is Alan Forrester. I am interested in science and philosophy: especially David Deutsch, Ayn Rand, Karl Popper and William Godwin.

One Response to Harris on Hoarding

  1. > Since there is less money consumers may decide to spend less on goods and services.

    What happens when the money supply drops is people find they are able to make lower bids to successfully buy things, because a lower bid than before represents a given proportion (e.g. 1%) of the money supply. (Trade, including buying, including buying labor, is like an *auction* where one has to outbid other buyers. People don’t understand this because they’re used to buying fixed price goods at stores and ordering from fixed price menus at restaurants. That’s basically because doing auctions more accurately has higher transaction costs.)

    Prices are basically proportions of the money supply, not absolute numbers. That’s why printing a bunch more money raises prices. To understand prices, you need to look at the total supply of money and the total supply of goods and services. If you divide up all the money by all the stuff for sale, you’ll have a first approximation of how prices work that’ll serve you way better than anti-capitalist propaganda.

    > Rather, they invest money

    In other words, they let other people borrow/use most of their wealth that they aren’t currently using for their own needs. Hoarding would be harmless, but also this isn’t hoarding.

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