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The Stakeholder Society

by Anne Alstott and Bruce Ackerman

A better title for this book would be The Santa Claus Society. The authors argue for giving an $80,000 gift to all non-criminal high school graduates at age 21, earlier if they go to college, which works out to a cool $255 billion a year annually when the book was written. In today’s dollars the cost would be over $300 billion from the federal treasury.

They argue for funding their plan with a two percent annual wealth tax. Bad idea. Wealth taxes in general are terrible. They punish people who invest, provide jobs and build infrastructure while rewarding rich hedonists. Someone who works 60 hours a week building a small business gets stuck with several thousand dollars a year in wealth taxes. A professional athlete who spends his five million dollar a year salary on parties, clothing, jewelry and vacations is free from wealth taxes.

They argue for “equal opportunity for all,” which translated means an equal dollar gift for most Americans in their late teens and early twenties. Much of their lofty rhetoric is the opposite of the truth. Their “equal opportunity” is unequal opportunity. Their unmerited “freedom” is at the expense of others merited freedoms. Their plan is variously alleged to be on the side of every American, ordinary Americans, young Americans, the less well-off, good consequences, good rights, while other plans are arbitrarily faulted for having one or more of these same traits.

They offer little research to support their claims. They should have done some research on young lottery winners and what they did with five and six figure winnings. The authors think 21-year-olds will turn around after blowing $80,000 and say, “OK, I blew it. Sign me up for that $5.85 an hour job with 25 percent taxes on top. As for my pregnant girlfriend, I’m gonna put every single penny of my income toward our family. I sure am glad we set up our society this way.”

The government has already given out trillions in unmerited gifts. Experience indicates that gifts do not make people stakeholders. It makes them lazy, greedy, hostile, defensive, resentful and alienated.

Welfare farmers are not grateful reciprocators. They are angry brats who consider themselves rugged individualists. The author’s plan would not lead to gains in “education, entrepreneurship and strong, stable families.” Most 21-year-olds do not yet know enough about the profession they are in to succeed as an entrepreneur. Sure, they could open hot dog stands on street corners, but we would be quickly saturated with micro-retailers and micro-retailing is not what spurs economic growth. Poor nations are glutted with micro-retailers. I am sure working class 28-year-olds who work 60 hours a week to support families, who never got the $80,000 gifts, will be pleased to see that their college student neighbors have brand new Porsches thanks to the government. They write that “Edmund Phelps is a kindred spirit.” I find that hard to believe.

The authors’ straw person attacks on consequentialism make Will Kymlicka’s look like nanodistortions. I know of no consequentialists on the planet who argues for the things Alstott and Ackerman claim. Even if they did, they are irrelevant to whether Santa Clausing, er, stakeholding is a good idea. Consequentialism would not gladly give $51 to a rich person rather than $50 to a lower-income person. Hello, anybody home? There is a thing called declining marginal utility. Utilitarians do not say sending Jews to death camps was right because it made most Germans proud. Do these two authors have any idea how much suffering goes on in a concentration camp? Pride is miniscule on the benefit side.

In addition people who are proud to see innocents suffer tend to make life miserable for multitudes of others in the long run, something consequentialists abhor. Consequetialism does not have all the answers, but it is not the monster these two concocted. If you can not accept the fact that free lunches are not so free, you should not be writing economics books. Not recommended.

—Book review article by J.T. Fournier.

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