The growing gap between the poor and the rich (at least the very rich) is reason for concern. With wealth concentration at the top, and an apparently shrinking middle class, no nation can thrive economically, politically, or culturally. But the path forward is not through a centrally managed economy. An economy controlled by the government cannot eliminate economic disparity. If you don’t believe me, look at professional football.
This weekend we saw the divisional playoff round unfold. On the AFC side of the playoff bracket every team that appeared in the divisional round last year appeared this year, and three of the four teams — Baltimore Ravens, New England Patriots, and Denver Broncos — have been playoff regulars for more than a decade. A similar story is told on the NFC side. The Green Bay Packers and San Francisco 49ers were once again in the second round of the playoffs, and each is a storied franchise with regular appearances in the playoffs and Super Bowl. The Seattle Seahawks made their second appearance in three years, and the Atlanta Falcons made their third trip in a row to the playoffs — their fourth in five years.
The winners from this weekend further illustrate the idea that the best teams in the NFL remain relatively the same over time. The 49ers, seeking their sixth Super Bowl appearance, are in the NFC championship game for the second year in a row. The AFC championship game is a repeat from last year and it is the third time in four years the Ravens and Patriots have faced one another in the championship game.
We should not expect this sort of regularity in professional football, and we should see more parity — if centrally planned economies work as expected.
Professional football is a centrally planned economy, with rules to help the worst teams and keep the best ones from always winning. Two of these rules are especially obvious and powerful.
First, the worse a team is, the better draft picks it gets. It is thus, theoretically, able to improve at a faster rate than the teams that pick behind it.
Second, there is a salary cap that keeps teams from spending as much as they might on players. This keeps the most talented players from concentrating in the biggest markets, such as sometimes happens with the Yankees or Red Sox in baseball, where there is no salary cap. In football every team has the same amount of money to spend on players.
In the planned football economy, we should see a more random playoff picture year to year, but instead the gap between successful teams and unsuccessful teams is growing.
In football, then, we should see a more random playoff picture year to year, but instead we get regularity. Such teams as the Cleveland Browns and the Kansas City Chiefs find it difficult to win consistently — and the gap between successful teams and unsuccessful teams is growing. The reason: rules may not be crucial, so long as they are applied fairly. If rules are applied fairly, the better-run organizations will come out ahead on a regular basis. They will separate themselves from the pack. There will be aberrations, but over time, the best will win more regularly.
This little sports experiment indicates that if a centrally managed economy is installed, and rules applied fairly, there will still be winners and losers, and there will still be a disparity between the haves and have-nots. After all, the Dallas Cowboys are worth over $2 billion and the Jacksonville Jaguars just sold for $760 million. And this in a league that has rules aimed at producing competitive and economic parity.
But what we know of politics and business is that the rules don’t always get applied fairly. The more money and power one has, the more access and leverage one can get within the political apparatus. Just ask the National Rifle Association or AIG. Thus, it becomes paradoxical to think that government policy, shaped as it is by lobbyists and special interests, will be equitable and fair. Turning to government to fix economic disparity is turning to the proxy for those at the top of the economic food chain. Those who want the government to intervene in the economy to correct economic disparities miss this paradox.
We have seen the government play favorites during the 2008–09 Wall Street bailouts. We have seen it play favorites in the subsidization of companies such as Tesla and Fisker (makers of $100,000 electric sports cars). Smaller banks, and companies without political influence, are left to sink or swim on their own, while larger ones, and ones that promote a government policy, are naturally aided by the government and use it to maintain an advantage.
Ideally we would see a free market solution adopted because people recognized the paradox and the futility of relying on the government. But a wholesale remake of the political economy is likely not going to take place. This isn’t to say that people are right to compromise their principles, but like a good quarterback, people tend simply to take what the defense will give them and enjoy small victories along the way.
The only feasible solution to this problem is to have simple, transparent government policies for regulations and taxes. The complexity of the tax code and the policies regulating business make it nearly impossible for anyone without a team of attorneys and accountants to chart a successful path. The federal tax code alone is so complicated that it’s not clear whether the fiscal cliff bargain raised or lowered taxes.
If simplicity and transparency were instituted, however, anyone who cared to pay attention would be qualified to do so, thus making it far more likely that the rules would be fairly written and fairly applied. The average citizen would no longer be at the mercy of politicians or pundits when struggling to decipher what the government had actually done.
Of course, simplicity and transparency would not generate economic equality either; but that's not the goal. Inequality is going to exist. Our primary concern ought to be with inequality generated, or exacerbated, by government intervention.