Ep. 19 Enough About Inequality Already; Here’s the Truth

22 January 2016     |     Tom Woods     |     37

Krugman wonders how rich “we need” the rich to be. A strange question, but you know the answer: less rich than they are now. We’re then treated to a lecture on income inequality. We don’t like lectures.

Is this the best episode yet of Contra Krugman? Tom thinks so….

Krugman Column

Is Vast Inequality Necessary?” (January 15, 2016)

Contra Columns

Says the Left: We Were Rich and Awesome When Taxes Were Higher,” by Tom Woods
Pope Francis, Income Inequality, Poverty, and Capitalism,” by Nicolas Cachanosky
Shocking Quotes from Thomas Piketty,” Bob Murphy

Article Mentioned

Inequality and Recovery,” by Paul Krugman

Tax Data


Book Mentioned

Wealth, Poverty, and Politics: An International Perspective, by Thomas Sowell

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Event Mentioned

Mises Circle in Houston

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  • Lucien

    No serious person could believe anything that Krugman writes.

  • Tyler Wombat

    Krugman is indeed a sinister character. His column is loaded from start to finish with pathological presumption, outright lies, and thinly veiled threats. The problem is, there are so many people in the U.S.A. who think (or fail to think) the way Krugman does. Envy and hatred are the engines of Progressive politics. People like Krugman aren’t happy with simply oppressing and harassing persons they don’t like. The feel driven to destroy them.

    • Enema Of The State

      ” His column is loaded from start to finish with pathological presumption, outright lies, and thinly veiled threats”

      If that wasn’t true he couldn’t call his column; The Conscience of a Liberal.

  • Lucien

    Bernie Sanders is actually more of a nut-job than Krugman. He actually believes the garbage that comes out of his mouth.

  • Tyler Wombat

    Dr. Murphy’s observations go straight to the heart of Krugman’s psychosis. It is also gratifying to note that Dr. Woods likes prime numbers.

  • Lucien

    I wonder if Bernie Sanders believes that roast chickens will fly into our mouths after the end of his first presidential term

    • Budthestud

      For those who don’t know, this is what socialists actually believe.

    • Enema Of The State

      It’s more likely that he thinks a rooster will fly up our ass if he becomes president. As a matter of fact I’m pretty sure they all think that.

    • Luke Perkins

      Sucks for the vegans =P

  • whateverdude

    From 3 dollars to 33 years…. and what did the price of gold do during that period? From 35 dollars to 1000 dollars….

    • http://libertyinfographics.com Techpriest of Syrinx

      I think the study was done in constant dollars.

  • whateverdude

    Krugman: Low incomes do not imply anything about your moral worth. Only high incomes can be used to make determinations about moral worth.

    Why the asymmetry? Coz Krugman is from Princeton, and you aren’t.

  • http://blog.monstuff.com Julien Couvreur

    “Do we need …?”

    This reminds me of a question that appeared on Quora “Why do we need billionaires?”. I’ll share my answer below:

    “That’s a weird question. It’s so loaded it is hard to unpack.
    Do we need geniuses? Do we need superstars? Do we need red haired people? Do we need Jews? Do we need you?”


  • Patrick T. Peterson

    Excellent discussion. Here’s another take on inequality that drew tons of Social Justice Warrior scorn, probably due to it’s very clear statements. http://www.paulgraham.com/ineq.html

  • Ben

    More evidence that it is the left, much more than the right, that is materialistic and obsessed with money.

  • Eileen

    One thing I noticed is that the definition of “rich” changed over the last 40 years; not so much in the tax code, which does bump people up (and IMO is why people leave the top 10%); the definition of “rich” changed in our political discourse. Soon it will be everybody with more than a few hundred in their bank account or a car that is less than 5 years old. When I first started working, rich meant gated communities and private jets and if you couldn’t afford a private jet, then sorry you weren’t rich.

    • Michael Nolan

      Yes, exactly. The goal is to take more and more from more and more people until you get the real end goal: everyone pays everything to the government, and after taking their cut, they dole out the money as if they are Santa Claus. Unfortunately, it also destroys any incentive to produce anything.

  • Eric

    Fantastic show today. Every sentence is a gem.

    Another relevant book is The Science of Liberty, by Timothy Ferris:


    Goes into great detail about how the ideas of (some of) the founding fathers were influenced by the rise of scientific thinking.

    One thing that I thought could have been stressed more is that there are plenty of 1%ers that are beloved by everyone. For example, Steve Jobs. Most of us don’t like Wall St bankers, but we do like what they do for our stock portfolio.

    Also didn’t stress the fact that while we might not like someone’s wealth, we’re willing to exchange money for goods with them. Most rich people don’t take much more than a fraction of a percent of our hard-earned income. But they take it from a large enough portion of the population that it adds up (imagine if everyone in the US gave you a dollar, you’d end up with $330 Million dollars). Contrast this with the state, which demands about 20-50% of your income (including all levels of government), at gunpoint, for rather dubious benefits.

  • danfromct

    It’s amusing to see Krugman tell us in this column that the ultra high taxes on top earners in the 1950’s didn’t hurt the economy when he did a study himself showing that effective tax rate on those top earners was only about 31%, or 50-60% when you add up their total taxes paid including corporate and estate…no where near the 91% ultra high rate.

  • https://www.facebook.com/david.rogers.hunt David_Rogers_Hunt

    Wow!!! I volunteer to agree with Tom’s assessment of this podcast’s content! In celebration, I intent to rant as long as the spirit moves me.

    First, let me excerpt from http://tomwoods.com/podcast/ep-576-feminism-enemy-of-liberty/#comment-2471266314 since we are discussing Egalitarianism. From Murray Rothbard’s essay, Egalitarianism as a Revolt against nature https://mises.org/library/egalitarianism-revolt-against-nature-0 comes…

    Since egalitarians begin with the a priori axiom that all people, and hence all groups of peoples, are uniform and equal, it then follows for them that any and all group differences in status, prestige, or authority in society must be the result of unjust “oppression” and irrational “discrimination.” Statistical proof of the “oppression” of redheads would proceed in a manner all too familiar in American political life; it might be shown, for example, that the median redhead income is lower than non-redheaded income, and further that the proportion of redheaded business executives, university professors, or congressmen is below their quotal representation in the population.

    Murray Rothbard has captured a very valuable insight into the thinking of egalitarians who are very suspicious of all group differences in status, prestige, or authority in society as being arbitrary when such things happen through voluntary exchange,.. but as NOT being arbitrary when they get to determine all group differences in status, prestige, or authority in society themselves. Of course, there is nothing self servicing here at all!?!?

    Well,… any rant that starts with Murray Rothbard has to have some small hope of being interesting. I happen to think there are some original insights here,… although I have been writing about these ideas for some time now. Much of what I have to say is both confirming libertarian suspicions, and lending credence to the worse cynicism of those around us. In the spirit of belief that the truth will set you free, I truly believe that we must understand the opposition if we hope to defeat them. Basic rule of War, Sun Tzu.

    I believe I first wrote about Personality Archetypes impact upon Political Ideologies back in 2nd November 2014 in http://tomwoods.com/podcast/ep-248-one-year-of-the-tom-woods-show-tom-takes-on-more-myths/ I will be extending those comments here… specifically in reference to Egalitarianism.

    First, and I can not emphasize this enough,… every survey, among people who self describe themselves as libertarian, has consistently found some 70-80% to be primarily ‘NT’ Rationalists in personality temperament. This isn’t a fluke. And yet, ‘NT’ Rationalists are, by far, the smallest personality temperament out there,… only 5-10% of any general population. A question I encourage you to ponder is if critical thinking is so great,… why are those who employ critical thinking always the minority?

    Second, the next personality temperament, ‘NF’ Idealists (15-20%) are social savants who are very charismatic, empathic, and almost always, well liked. These are the story tellers,… journalists, writers, actors, most anyone and everyone you encounter in print and broadcast journalism, movies, and television. You know,… the Main Stream Media. These guys are really primed and ready to make friends and influence people! Unfortunately, most all of the their ethical, moral, and economic intuitions of what is right and wrong, reasonable and unreasonable, fair and not fair, just or unjust, all come from far back in human prehistory. That is why these folks almost always frame questions in terms of life boat ethics,… which is really quite absurd, but somehow always seem perfectly appropriate, to ‘NF’ Idealists.

    In human prehistory, the range of productivity between the best hunters and the worse hunters was negligible to the range of productivity between the most productive people today and the least. But the only reaction that great productivity today evokes is that of envy. Why? Because, in human prehistory, if one person was overly fed, while someone else was starving, the only, obvious, ethical response was that the food was not being equitably shared. That was it. When living in nomadic, egalitarian, tribal societies, of some 60 to 120 or so people, for all of far off prehistory,… what else was there to do with limited wealth,… but share? Is it really so strange, that today, social savant’s answer to every social problem is just to share, and that will solve any problem.

    What the social savants are missing is that wealth is no longer fixed/zero summed, in which the only wealth is what one finds in the natural environment, or makes oneself.

    The first recognizable activity that our homo sapien ancestors did differently from our past cousins was to engage in long distance trade. No other animal has ever done this. Somewhere, about this time, we created language, music, story telling. Then, only about 12,000 years ago after the receding of the last major Ice Age, we discovered agriculture. Soon, after that, we discovered domesticating livestock, for meat and other animal products. That, most probably, soon led to the discovery of how sex was necessary for procreation. By which, the new concept of father arose. And then, marriage.

    To raise agriculture production, we created large irrigation technologies, which required large organizations of people to maintain. Writing was invented,… at first only to track inventory,.. later to commemorate great events. Taxes first arrive (Boo!!), along with the first hierarchical ruling systems. Starting about 6,000 years ago, gold started being used as a medium of exchange.

    Now, in more recent times, we have vastly more knowledge about ourselves and our environment, We have new tools, such as paper, books, computers, and an internet, serving as a new, global, central nervous system for the entire globe.

    All these new ways to create wealth only provoke envy, and resentment, and anger, in those of us who are social savants,… because social savants’ power comes from influencing people alone. They are useless with mathematics, science, technology, medicine,… basically anything at all that is falsifiable. No wonder college humanities are overrun with these guys. Everything in their world of competence is solely evaluated by how our feelings respond to what they present to us. That’s it!

    Where libertarians see the most productive individuals being rewarded for their efforts by the value customers choose to pay for those efforts (meritocracy), egalitarians see poverty of the many, and immoral hoarding by the overly prosperous few (altruism). As the world becomes ever more prosperous, the resentment of the relatively poorer members of society grows. Idealists measure wealth in relative terms primarily, and not in absolute terms. How am I doing today with respect to the most wealthy today,… rather than how am I doing with myself in the past,… or with any one else in the world today.

    Trying to get an Idealist to see that the wealth that will cure poverty will be readily created by the poor themselves, once their property rights are fully restored to them, is like trying to convince a skeptic that it is perfectly reasonable to jump off a tall building,… because the jumper can always invent, create, and deploy a parachute before hitting the ground. When anarcho-capitalists argue for the possibility of entirely getting rid of the state, when there doesn’t appear to be any viable examples of such in the world today,… makes about as much sense as arguing for the possibility of heavier than air flight transportation, in the eighteenth century.

    It’s not that egalitarians are stupid, evil, mendacious, or fully intending the destruction of Western Civilization. It’s that wealth is largely conceived as being fixed/zero summed, and must, therefore, be equitable distributed, rather than wealth as being open summed and therefore, equitably belonging to those who first create it.

    In human prehistory, it was not possible for the best hunters to eat all the food they could catch, nor could they store it for later consumption. One could only share the meat,… or lose it. I strongly suggest that this is the fundamental root of modern Keynesianism and egalitarianism.

    Consider, if you will, the following ubiquitous Progressive Assertions:

    1) Scarcity is NOT natural. Scarcity ONLY happens because of greed. Production isn’t necessary; only sharing. At any time in the past, present, or future, universal prosperity is always possible, except for the greed of a few.

    2) http://en.wikipedia.org/wiki/A… , as advocated by folks such as Noam Chomsky, is the way to go. No one needs prices to know what is worthwhile to do. Hierarchies and specialization shouldn’t be necessary. Reason, and good will, are adequate to plan production. Labor is not a commodity.

    3) Sovereignty should be based upon Good Intentions and not free moral agency. Corollary: Rule by Philosopher Kings!!

    4) No one should ever have to suffer through no fault of their own.

    5) From each according to their ability, to each according to their needs (regardless of cost to everyone),… is still the best way to organize society,… but people are too greedy and selfish to make it work. It would be better for society to live as social insects, than as human beings.

    6) Why be satisfied with trade-offs when solutions suggest themselves so obviously!

    7) Wealth is consumption, not production. We have our cake, not because we bake it, but because we eat it.

    8) Results flow from will, and will alone. If good results are not forthcoming, it is ONLY due to either a lack of good will or the presence of an opposing evil will. It is NEVER construed that results are lacking due to a lack of knowledge. Knowledge, science, technology, etc., are just incidental details.

    9) Lifeboat ethics reign always.

    Is it really a surprise anymore that the lemmings seem to always be in control?

    What to do? Again, I believe we could blow all this claptrap away in a minute with a judicious use of humor. We have to make the statists look absurd,… as a nude emperor is.

    Ridicule is the only weapon which can be used against unintelligible propositions. Ideas must be distinct before reason can act upon them.
    ~ Thomas Jefferson

    Irreverence is the champion of liberty and its only sure defense.
    ~ Mark Twain

    [Humanity] has unquestionably one really effective weapon—laughter. Power, money, persuasion, supplication, persecution—these can lift at a colossal humbug—push it a little—weaken it a little, century by century, but only laughter can blow it to rags and atoms at a blast. Against the assault of laughter nothing can stand.
    ~ Mark Twain

    Political correctness is simply tyranny with manners.
    ~ Charlton Heston

  • Brian Thom

    Gladwell’s point in Outliers was that Bill Gates and the Beatles both worked extremely hard AND were fortunate enough to be placed in the ideal situation, as opposed to those who merely worked extremely hard.

    • QuantumG

      There’s a lot of people who were in the exact same situations and they didn’t do anything. Look around, opportunities are ubiquitous. Persistence, intelligence and a strong work ethic? Not so much.

  • Vance Lopez

    My favorite episode so far. Devastating arguments. Thanks!

  • VladRatzen

    wow, after hearing this episode i feel kinda rambo. now equipped with new advanced arguments to crush any socialist within seconds… they will never see it coming.

  • VladRatzen

    Thomas Sowell by the way is available on youtube. i watched him hours and hours. i like his work very much. but let me tell you, he is a warhawk. i stumbeld upon a chapter about the germans, written by thomas sowell. i was really stunned about his writings. he changed my way of looking at things dramaticaly.

    • Vance Lopez

      Not sure what you’ve read, but he does have an interesting war point of view in this article about the summer 2014 Israeli / Gaza conflict, which at the time I was interning in Tel Aviv.


      It’s really an economics approach to the violence.

      • VladRatzen

        the book i ment was “Black Rednecks and White Liberals”.

      • VladRatzen

        just to make it clear: i called sowell a warhawk because of his interviews on youtube. he said that obama has “diddled” with iran for example. i personally believe what ron paul said about iran – iran is not a threat.

        • Luke Perkins

          iran is not a threat.

          Which is what makes Iran a perfect enemy for the US government. A boogeyman to keep the US citizens scared out of their minds while not actually providing a real danger to the Government.

          Brilliant =D

          • VladRatzen

            right, its a perfect example for propaganda and what it does.

            but it could also be the case that someone who wants to be a fellow at the hoover institute must have a kind of distorted view about certain things. who knows..?

  • Luke Perkins

    BTW, Ichabod is a Hebrew name meaning “Glory has departed,” or “Glory is lost,” given to the son of Eli and Phinehas who was born when Phinehas received word Eli was slain, and the Ark of the Covenant captured, by the Philistines in battle, the shock of the news causing Phinehas to go into labor.

    For whatever that’s worth 😉

  • got_g

    my favorite episode too.

  • mlee952

    Under socialism, the planets will copulate and the oceans will fill with lemonade. Yes, they believe it.

  • mary

    Tom and Bob, I was very happy to hear this episode. It is pretty much known by everyone in the tax prep biz that 1. the tax code is most punitive for those making high w2 incomes, usually owners of innovative, growing businesses 2. the “rich” do not pay income taxes, they shift their incomes to foundations, corporations, royalties, cap gains, real estate with heavy tax breaks, etc, The Rich Dad books explain this.
    The true 1% problem, more like the 0.1% problem is the scum who control the levers of gov’t–banksters and their underling pols. A truly free market would force them all to get real jobs and likely they would earn zero.
    Be that as it may, the rising inequality of incomes in the US, reminiscent of third world dictatorships, is significant as an indicator of the level of corruption. It is not the cause of injustice so much as the result of injustice–that 0.1% scum rising to the top of a corrupt system. Therefore, it makes no sense to try to “level the playing field” by taxing the rich. The truly rich will never be taxed. The deca millionaire biz owners will quit or leave destroying employment opportunities for the rest of us. And ultimately, the middle class will be pushed into poverty by inflation/financial repression, tax bracket creep, etc.
    As usual, the mainstream commentators distract the masses by identifying the symptoms as being the cause of our disease.

  • Luke_Avedon

    Hello, are there any plans to release transcripts of Contra Krugman — similar to the supporting listeners deal with The Tom Woods Show? Thanks!

    • http://www.TomWoods.com Tom Woods

      Probably not. I have too many spinning plates in the air (or whatever the expression is) as it is, I’m afraid.

      • Luke_Avedon

        No problem. Thank you for the reply Tom — keep up the amazing work.