PROJECTS: Economics Ideas (3)

Why do you think income gap between the poorest and the richest people in the US and most of the rest of the world is increasing? Here I present my theory. The existence of profits by Mises and Hayek is a normal economic event in the ever changing world. Entrepreneurs who figured out how to extract profits from the right economic activity should be challenged by the competition for the same profits from other entrepreneurs thus driving the profits to zero and as a result reducing the gap in income. This incentive has been distorted by the government. First, the government created the welfare programs that implicitly discourage people from striving to efficiently and continually seek profit opportunities. Second, to finance these welfare programs the government has to redistribute income from the most successful entrepreneurs (richest people) to the not-so-much successful ones (poorest people) which is possible if (a) the richest allow this in exchange of exclusive rights on profits opportunities and protection of those rights by the government and (b) the poorest become the society's majority and now dictate the rules of how income should be redistributed (which is in this case really stolen). Neither of the aforementioned stimulates healthy economic environment and would lead to a collapse of the government-regulated capitalism and ultimately to an end of a civilized society. This is another reason why voluntary governance must replace coercive government which we have now.