Contra Tanner on Wall Street, Financiers, Inheritance and Egalitarianism.

• Author: Block, Walter E.

1. INTRODUCTION:

   Tanner (2016) opposes what he considers the financial and stock exchange chicaneries that occur on Wall Street and favors a more egalitarian economy. The present paper diverges from this author on both counts. In section II, we consider his views on Wall Street and finance. Section III is devoted to offering a different perspective than his on inheritance and income and wealth inequality. We conclude in section IV.

2. WALL STREET AND FINANCE

   According to Tanner (2016) the following is the case: "... relatively few rich people work on Wall Street or in finance. Most rich people got that way by providing us with goods and services that improve our lives."

   The clear implication here is that unlike those who "provid(e) ... us with goods and services that improve our lives" those who "work on Wall Street or in finance" do not "provid(e) ... us with goods and services that improve our lives." Now this is more than passing curious, stemming from the word processor of an analyst from the Cato Institute, which "is a public policy research organization--a think tank--dedicated to the principles of individual liberty, limited government, free markets." (1)

   Presumably this organization is also dedicated to sound economics. But, according to the statement mentioned above, those who "work on Wall Street or in finance" are doing something other than "providing us with goods and services that improve our lives." What then, are they doing? What is the alternative to "providing us with goods and services that improve our lives?" What else could this be other than exploiting the rest of us. These people are paid handsomely. And, yet, instead of providing the remainder of the population with something of value, in return, they are failing to do so. What else can this mean other than they are, somehow, cheating us.

   Although this is a false contention, it comes with a certain historical pedigree. The physiocrats maintained that only farmers "provid(e) ... us with goods and services that improve our lives." (2) All others, presumably, exploited us. But then a greater appreciation of economics took hold, and manufactured goods, too, were counted as beneficial. Hooray, now, for both farmers and manufacturers. However, services still had a bandit-like existence at this point in the development of the dismal science. It was not until much more recently that the providers of services were added to the mix, and then we could count on all three to contribute to economic wealth: farms, factories, and those who delivered services to us. But not all services are included. At least according to Tanner, those services emanating from "Wall Street or in finance" still do not fit this bill.

   Well, it is time, it is past time, that they were included too. We live in an age of inclusiveness, do we not? We would not want to discriminate, horrors!, against such people. But, before we add them to this list of virtues, let us ask what is it, exactly, that they do add to our economic welfare?

   It is simple: they facilitate trade. Commercial interaction, too, makes a valuable contribution to our economy. If oranges are selling for $1 in Florida, and $10 in Montana, then an intermediary, a middleman, a huckster, an entrepreneur, will see to it that they are transferred from the former, where they are in relative abundance, to the latter, where they are in short supply. They will of course profit, but in so doing will increase the value of these items, without growing them, without watering them, without cleaning them, without initially planting the trees that bear this fruit. But the same exact analysis applies to stocks. Wall Street, too, enhances the values of stocks, by facilitating their transfer from those who value them less (bears) to those who value them more (bulls). Nor must we ignore "finance." People in this industry, too, operate in a similar manner, only instead of increasing the value of oranges, or stocks in corporations, they do so for savers and investors. The former have more money than they know what to do with at present, and the latter are in dire need of same. Switching from one to the other increases the value of both, even though there are the same number of dollars before and after the transaction. Tanner does not mention real estate brokers, but the same analysis applies to them: they facilitate interaction between buyers and sellers of houses to the benefit of both.

   But perhaps I am being unfair to this author. The material from him quoted above appeared, only, in the "executive summary" of his essay. What are we to say about the following, then, which appeared in the main body of this publication (Tanner, 2016, p. 8):

   ... the public increasingly believes that financial traders are up to no good. After all, how many people really understand...