At this point, however, Mr. Reich and I part ways ideologically: he claims that the government has to embrace its natural role as designer of the market and reconstruct it in the spirit of fairness and meritocracy. This claim raises questions about the depth of his understanding of the issue at hand as well as the causes of it. One can correctly assess that this issue arose from the superposition of greed and government over-reach. The greed of the rich is understandable,4 as the vast majority of people are ruled by self interest. The reason it is problematic, unlike the greed of a common worker is that the wealthy derive the vast majority of their income from profits, which naturally decline as competition on the supply side of the market and wages of labor increase, which, in turn, inevitably happen as societies increase their wealth (Smith 1976:278). Therefore, there is a contradiction between the interest of the rich and that of the society as a whole, which renders the principle of the invisible hand (Smith 1976:477) inapplicable if they have the means to circumvent the natural rules of the market available to them through the power of the …show more content…
This is not to say that government should never intervene, as there are cases where such an intervention could be viewed as objectively beneficial to society, such as reducing the cost of education by creating an incentive for people to become teachers through subsidies of their training (Smith 1976:150). Nonetheless, it does serve as an argument for carefully and suspiciously analyzing any state action that would disrupt the natural flow of capital, such as some of of the issues pointed out by Mr. Reich – in order to limit these inequities, we could simply prevent the government from enforcing them. This option is preferable to the one hinted at by him simply because we have historical evidence of the problems such a system faces in the inefficiency characteristic to the mercantile period. Just as back then, even if we were to give the benefit of the doubt to the legislator who wants to alter the flow of capital “for the greater good” and assume he is of good faith, we have no reason to believe that the decisions he takes that influence the flow of the economy are wiser than the natural alternative. In other words, the sum of individual choices made by every economic actor with regard to his own capital are preferable, as those choices are made by people who have a significantly deeper understanding