Thursday, 27 February 2014

Skin in the Game

I once posted that if you pay you should have your say - i.e. if you pay tax you should be able to vote (frequently). The counter argument to that is that many people are net takers of benefits, not net payers of tax, and that any increase in their voting power will lead to an increase in socialism and a redistribution of wealth from rich to poor. Yet Swiss direct democracy has resulted in the opposite. Why?
It could be a cultural thing. It could be caused by a quirk of history and the timing of events. Or it could be that voters want the best for their country because that is best for them. Because they have skin in the game. And they understand that taxing the rich excessively is likely to cause them to flee to more welcoming jurisdictions which will be a loss to all. Because the rich are more mobile and typically, as a proportion of their wealth, have less money tied up in fixed assets - they have less skin in the game. On the other hand, the average voter has more of their wealth tied up in their house, is less mobile and has more skin in the game. Thus they are often more committed to their country.
Yet in a representative system the wealthy can influence politics through their ability to fund political parties. The average voter has little say. Perhaps this imbalance leads to more income inequality.
This post was inspired by "Antifragile" by Nassim Taleb.

No comments: