« Those Old Failed Policies of the Past | Main | What the Hell do I do Now? »
The 80/20 Rule
By John | March 6, 2009
According to the 80/20 Rule, in any given population, 20% of the people will provide 80% of the production for the entire group. In other words, 80% of the people will only provide 20% of the total production. This rule is frequently applied to sales organizations, but it seems to have general application - it seems to conform to human nature. For whatever reason, only about one out of five people are truly motivated; are truly committed to excel at what they do.
Now, let’s suppose we have a society of free people, a society subject to laws that protect the freedom and rights of its people; a society with a government that enforces those laws, but otherwise leaves everyone to pursue his own interests. According to the 80/20 Rule, after a period of time, about 20% of the people in that society will hold about 80% of the wealth of that society. Why? Because only about 20% of the people are really driven to succeed. They work exceptionally hard, apply themselves to achieving their goals, and become economically successful. The other 80% are satisfied to just “get by.” They may live relatively successful lives, but they are not motivated to excel like the top 20%. But, because of the exceptional productivity of the top 20%, much wealth is created, employment opportunities abound, and the entire society flourishes.
Now let’s take that same society and make it a pure democracy. Unlike in the above example, where the government was limited to those tasks necessary to protect the rights and freedom of its people, in a pure democracy everyone has a vote, and the government is free to involve itself in whatever the majority decides it wants the government to do.
Absent restraints, voters now begin voting for their perceived self-interest. For 80% of those voters - the 80% that only has 20% of the wealth - it now becomes in their self interest to “spread the wealth.” Rather than have wealth distributed according to who earned it, let’s distribute it more equally. Let’s establish a new value system, one that rewards everyone equally, not one that rewards those over-achievers.
This, of course, appeals to the bottom 80% of the economy. Unfortunately, this new system creates a strong disincentive to produce for the top 20% of the economy. At first, it doesn’t seem to make much difference, as a seemingly fixed quantity of wealth is re-distributed throughout the economy. The bottom 80% are very pleased at being able to acquire wealth they have not earned.
The top 20%, however, are not pleased. They have no further incentive to be productive. If everyone receives the same reward, regardless of effort, everyone is encouraged to become “average.” And, without incentives, this “average” steadily declines into mediocrity. The productivity of the entire society declines. Everyone is now equal. Everyone now lives in poverty.
This is not conjecture. That the above scenario is an accurate description of human behavior is an observable fact. Travel around the globe. Compare the wealth of people in various countries with the economic system is which they live. Free people, living in a society with a stable government that respects the freedom and property rights of its citizens, flourish. Governments that do not allow its citizens to keep the fruits of their own labor preside over impoverished populations.
OK, so why would democracies vote to re-distribute wealth? It isn’t in their own interest, is it?
Well, that assumes voters are intelligent, informed, responsible, far-sighted people. That assumes voters will not choose their short-term interests at the expense of their long-term interests. I contend those assumptions are false.
Much criticism has been leveled at Republicans in the U.S. for not standing up for limited government, for fiscal responsibility, for supporting the Constitution, for private property rights, for freedom. Polls seem to indicate that most voters believe in the principles of government established by the Founding Fathers. However, when it comes time to vote, are those voters even aware of how those principles relate to what they are voting for? If a candidate promises to “help” me, will I not vote for him? If I am promised something for nothing, if I am promised that I will be protected from my own bad behavior, will I not be swayed by those promises?
An argument can be made that the steady growth of the Federal Government in the U.S., at the expense of individual freedom, is inevitable. Observe the history of the past one hundred years. The rate of growth, the pace at which new government programs are developed, varies. But the trend is unmistakable. Government advances. Freedom retreats.
Is it realistic to expect that a new generation of officials will be elected who will then proceed to reinstate our freedoms and reduce the size and scope of government? Who will vote for them? If it hasn’t happened in one hundred years, under both Republican and Democratic administrations, what would make us believe it will happen in the future? What would bring about such change? After all, in a democratic society, don’t the people get what they want?
Topics: Property Rights |