Posner on Wealth, Luck, and Taxing the Rich

Read about it here. Check out this excerpt:

The economic significance of the disagreement [between conservatives and liberals about the role of luck in financial success] has mainly to do with taxation. Taxing success that is attributable to pure luck does not have disincentive effects, and so is a cheap away of financing government. Taxing success that is attributable to hard work may induce a substitution toward leisure, reducing money incomes, and taxing financial success attributable to talent may induce some talented people to substitute activities that generate substantial nonpecuniary income (apart from leisure), which may not be socially as productive as business. Beyond the economic concern, however, is an ethical one that is particularly acute in a society, such as ours has become, in which there is great inequality of income and wealth. I don’t find any merit to the celebration of the tycoon by Ayn Rand and her followers. I think that ultimately everything is attributable to luck, good or bad. Not just the obvious things, like IQ, genes that predipose to health or sickliness, the historical era and the country in which one is born, the wealth of one’s parents, whom one happens to meet at critical stages of one’s life and career, one’s height and looks and temperament, to the extent genetic, and one’s innate propensity to risk or caution (that is an exceptionally important factor); but also the characteristics that cause a person to make critical decisions that may turn out well or badly, characteristics that really are derivative from some of the previously noted “luck” characteristics. The decision-determining characteristics include intelligence, imagination, attitude toward risk, and personality characteristics such as aggressiveness, maladjustment, indolence, and having a low or high personal discount rate (how future-regarding one is or is not). Talent is luck but so is the propensity for working hard (often the consequence of a compulsive personality) or not working hard. In short, I do not believe in free will.