Should You LEAP Before You Look?

My mother often pointed out that leaping before looking fails.  “The LEAP Manifesto: A Call for Caring for the Earth and One Another” is an example you could use as a test.

LEAP is a mid September 2015 publication from among others, some well known activists, Naomi Klein, David Suzuki, and their celebrities, Neil Young, Leonard Cohen and Donald Sutherland.  The thesis is that Canada can become a benign, environmentally friendly, carbon avoiding, equal society.  All of whom use public transit.  Fascinating proposition.    It is beautiful and costly production.  Here.

Let’s check the logic?

Critical Thinking 101 starts with deductive reasoning.  The if A and B then C type thought.  Some people abuse that instinctive thought method by inserting A and B premises that are presented as true, but may not be. You cannot reach a valid conclusion if a premise is uncertain.

From the manifesto, “Deepening poverty and inequality are a scar on the country’s present.”

As the cross examiner might say, “Let’s talk about that.”

“Scar” is a metaphor here, but generally “scar” is emotionally negative.  “Attractive scar” seems wrong.  Am I being manipulated emotionally? Yes.

“Deepening poverty”  means what?  Are the poor poorer, or are they relatively poorer, or neither?  No information.  Again expect an emotional response.

“Inequality” is bad right?  While our instinct is it is bad, there is no fact to support it being bad or even being true.  It is an assumption.

Inequality of opportunity is intolerable.  Inequality of outcome is theoretically wrong, but how do you decide when?  If a child practices piano two hours a day, while another student practices not at all, should they expect equal skills at the end of the year?  If not, should we do something to make them equal?  Why should high earners be susceptible to that same obvious fallacy?

Inequality, while not a fact, is a popular topic in Canada during the federal election campaign.  If you accept raw numbers, presented out of context, you could easily assume the answer is we are unequal.  If you understand Critical Thinking 101, it is less likely you will see it that way.

The Gini Coefficent is the conventional measure of income inequality.  It goes from 0 to 1.  At zero everyone has the same income and at 1, a single person has it all.  Canada is presently about .45 or about .32 depending on how you measure.  Few countries are below .25

The Conference Board of Canada produced this chart in 2013.

conference board gini co soc_IncIneq_ch5-2012The red diamonds are the pure income numbers while the bars adjust for taxes and transfer payments.

The bars make more sense to establish the real relationship.  In Canada, having income means tax costs and having no income does not mean you have no money.

Missing from the graph is the application of skill, effort, discipline and risk.  All very unequal.  Those categories presently correlate with higher income.  Lower income people should notice that and if they can, do something about it.

To assess that Canada is frightfully unequal is a stretch.  Even ignoring the stretch, to have a meaningful conversation about equality, one must ask, “What  should the Gini be?”

Zero Gini is not an option because the poor will have no income at all unless the wealthier provide transfers.  So the fair question becomes, “Where above zero should it fall?”

To earn people must have a reason to do so.  Most of the people with higher incomes have more skill, are more productive and more ambitious.  Becoming equal at the outcome level denies the value of those, just like piano practice.  How do you motivate people to produce wealth?

I have yet to find a equality-caring person who can answer “What should the Gini Coefficient be?” and “Why should anyone work harder to earn more if it provides no benefit to themselves?” Working costs at least the time away from family and friends.

The make it equal folks assume the wealth will exist so they can redistribute it.  That assumption is wrong.

Wealth creation first.  Rational redistribution later. Someone should create The LOOK Manifesto: A Call For Rational Thought.

Don Shaughnessy is a retired partner in an international public accounting firm and is now with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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