Does Class Warfare Have A Free-Rider Problem?

Many people believe that the rich have captured government for their own ends. For example, rich people use their money and power to decrease tax rates on the wealthy and sabotage legislation meant to protect the working man.

But this raises a coordination problem. After all, suppose you are a rich person who makes $1 million per year. You would like the government to cut federal taxes on the wealthy from 40% down to 30%, which would save you $100,000 per year. One might think you would be willing to spend up to $100,000 to effect this goal.

But in fact it requires the concerted effort of all the rich people across the country to make this happen. A single $100,000 donation isn’t going to change federal level policy in such a spectacular way. Realistically your effort will be a drop in a bucket that your entire class needs to contribute to.

So we should expect free rider problems. Suppose a representative of the Rich People’s Union asks for a $10,000 donation to fight for lower taxes. There are hundreds of thousands of rich people, so you’re pretty sure your one donation isn’t going to push anything over the edge one way or the other. Supposing the tax cut goes through, you will get the same benefit whether you donated or not; supposing it doesn’t, you won’t gain anything either way. It’s easy to see that in either case the rational self-interested thing to do is to refuse to donate.

There are a couple of rare exceptions to this. If you are Bill Gates and make a billion dollars a year, so that you would gain $100 million from the tax cut, it might be worth bribing the necessary legislators all on your own, on the grounds that if something needs to be done right you had better do it yourself. Likewise, if you’re Exxon Mobil or the Koch brothers, then you might be a big enough chunk of the target population for certain specific environmental regulations that it’s worth using your own money to fight it whether or not others join in.

But a general focus on the interests of the rich? Not likely.

We can compare this to good people playing normal politics, who usually have a hard time rallying support for important causes like global warming or net neutrality. In the same way, rich people playing at the politics of greed should have a hard time convincing their target demographic to get out of bed and join in their attempts to soak the poor.

But in fact their job is much harder. When good people do rally the masses to their cause, it seems to be through an appeal to principle. Like “Yes, I know it would be much easier for you to sit back and let other people solve global warming, but you have an ethical responsibility to participate in this, and won’t you feel good about yourself knowing you’ve made a difference.”

Obviously if your campaign is “soak the poor to line our own pockets” this is harder to pull off.

Is there any model in which the rich could successfully manipulate politics for their own benefit?

I’m reminded of the research I looked at in Plutocracy Isn’t About Money. People seem to donate surprisingly little to political candidates, and donations don’t seem to help. This seems consistent with the idea that rich people don’t directly coordinate to bribe politicians in their favor. I suggested a couple of different hypotheses, like that maybe the rich win because of “soft power” – ie the media and universities and politicians are mostly rich or are run by rich people who just sort of naturally let their opinions percolate through without much deliberate effort.

An alternative explanation preserves our intuitive belief that the rich sure do seem to influence politics a lot. Maybe rich people, like poor people, participate in politics because of sincere belief in their moral values, and their values are by what seems a weird coincidence the ones that help make them richer.

Like, Mitt Romney’s zillion-dollar-a-plate fundraisers seem to always be pretty full. It can’t literally be in a rich person’s self-interest to buy a plate there. But a lot of rich people could have conservative-libertarian-pro-business ideas that encourage them to quasi-altruistically support Mitt Romney in order to push their values.

But this is really weird and interesting – much more interesting than it looks. It suggests that, in the presence of a useful selfish goal to coordinate around, a value system will “spring up” that convinces people to support it for altruistic reasons.

I’m not just talking about normal altruism here. A rich person motivated by normal altruism per se might be against tax cuts for the rich, in order to better preserve social services for the less fortunate. And I’m not just talking about normal selfishness either. A rich person motivated by selfishness would hang out in his mansion all day instead of wasting money on fundraisers. I’m talking about a moral system which is genuinely self-sacrificing on the individual level, but which when universalized has the effect of helping the rich person get richer.

It’s worth thinking about this in contractarian terms. A rich person, minus the veil of ignorance, wouldn’t support everyone pitching in to help the poor, because he knows he’s not poor and so gains nothing. A rich person, minus the veil of ignorance, would support a binding pact among all rich people to pitch in to support tax cuts on the rich, because she knows she would gain more than she loses from such an agreement.

But as far as I can tell, this calculation is never made on a conscious level. What happens on a conscious level is the rich person finds themselves supporting some moral philosophy – libertarianism, Objectivism, prosperity gospel, whatever – which says it is morally wrong to raise taxes on the rich, so much so that one should altruistically make personal sacrifices in order to stop them from being raised. And then these moral philosophies spread, and without any conscious awareness, the rich people find themselves coordinating very nicely to protect their class interests.

I hope you agree that if this is true, it’s spooky. I admit on this blog I sometimes mock human nature and human cognition a little too much, but this particular cognitive process is really impressive. I hope whatever angel designed it got a promotion.

So although I haven’t really thought this through too much, I would suggest a dichotomy. Either there’s some sort of spooky system that generates heartfelt moral philosophies on demand to solve coordination problems, or the rich aren’t actually coordinating and just consistently keep getting lucky.

I don’t like this because it raises more questions than it answers. Why don’t the poor coordinate this well? Too many of them? And if this is true, how much more credence should we give other conspiracy theories?