Disclaimer: Possible political controversy here.

I was asked who I thought was the worse parasite, someone living on his investments or someone living on the welfare system?

To answer that, I suggest reading this primer on simple “Robinson Crusoe” economics first.

Imagine two people who only eat apples. Each day they each pick 50 apples. Since 40 apples is enough to sustain each of them, they don’t need to work–that is, pick apples all the time. When Apple Eater #1 is not working, he spends time hanging out while consuming (spending) the apples he saved. Apple Eater #2 is working in his spare time to fashion a picking stick (investing) which will allow him to pick 50 apples in half the time. Eventually, he makes 10 sticks. Apple Eater #2 offers to lend out a stick, which allows one to pick 100 apples in the time it normally takes to pick 50, in return for five of those apples. Lending 10 sticks out, he gets 50 apples a day from “rent” or “dividends” instead of work. Apple Eater #2 is living on his investments.

A welfare recipient is someone who either can’t or won’t work, in Apple World and in reality. Normally, such a person would starve, but there is a third group of people called government, who don’t pick any apples either, and who go around taking other people’s apples and giving them to others.

Overall, I’d say the welfare recipient is worse. Without him, everybody would be better off money-wise, except the government workers. Conversely, without the person lending out the money (sticks), everybody would be worse off, because they wouldn’t be able to pick as many apples.

Note that I said “money-wise.” It may well be that the welfare recipient is a nice person that the entire community likes and that the capitalist is a mean bastard. Apple-wise, though, the capitalist has made people richer (in apples) and the welfare recipient has made people poorer (in apples).

Let’s further complicate the example: Can the capitalist morally patent his stick, thus preventing others from making their own sticks? Is it better to take people’s money legally, but perhaps not morally, and give it to the poor, than the poor taking it illegally and ending up in prison? The latter is very much the US solution; the former is the European solution. What about the carrying capacity of the apple trees? Did the sticks make the world better for the apple trees? Should we care? What if we pick so many apples that there are none left to eat?

Indeed, things quickly get complicated when considering the systemic effects. From a micro perspective, though, the capitalist is a giver and the welfare recipient is a taker.

I’m almost afraid to ask, but what do you think?

Originally posted 2010-08-26 11:56:24.