Jimmy Akin

A piece back I reviewed the book Freakonomics, which is quite an enjoyable read. Today I’d like to talk about Ferengi-nomics, though–the economics that exist (or could exist) on the world of Ferenginar.

There’s an episode very late in DS9 (in fact, it’s the next to last episode, if memory serves) in which taxes have been introduced on Feriginar as part of Grand Nagus Zek’s left-leaning societal reforms.

Quark is horrified when he learns of this, saying that taxes run contrary to the spirit of the free market. “That’s why it’s called free,” he says.

Actually, that’s not why it’s called “free,” at least not on Earth, but it’s a good line, and you can’t expect the Hollywood lefties who write the show to understand economics.

What’s worse (from Quark’s perspective) is that not only have taxes been introduced, a progressive income tax has been created.

For those who may not be aware, a progressive income tax is one in which people who make more money are charged a higher tax rate. They not only pay more tax total, they pay taxes at a higher rate. Thus if a person in a lower income bracket pays 20% of his income in income tax, a person in a higher income range might pay 40% of his income.

The theory behind progressive income taxes is that the more money you have, the more you can afford to pay a higher percentage of your income in taxes.

The problem with progressive income taxes is that they serve as a dis-incentive to make more money. If you have to work harder for each new dollar of (after tax) take-home pay then that unmotivates you to do the work needed to get that dollar, and so at some point you say, “Eh. I’ve got enough. Why should I work harder to get more when the government will only take more of it.”

And thus economic development caps out. That means that there are fewer jobs that exist than would exist if the income tax rate weren’t progressive. The progressiveness of the tax rate serves as a drag on the economy that ends up keeping people jobless and harms them in bunches of different ways related to an absence of money in the economy that would otherwise be there.

What happens if you make the tax rate less progressive? People in the top tax bracket (i.e., the ones with the money) get more motivated to make money since they can now keep more of it. Economic growth is stimulated. Jobs are created. And, in many circumstances, the tax revenue that the government collects actually goes up since the economic stimulus provided by the lower rate more than offsets the fact that the rate has itself gone down.

Which raises a question.

Think for a minute about Ferenginar.

Assuming that they did have taxes there, and assuming that we set aside the Hollywood writers’ progressive income tax on Ferenginar idea, what kind of tax rate would they have there?

Ferengi place a value on economic development above all else. If having a highly progressive tax rate highly hampers the economy, and if a less progressive tax rate hampers the economy less, then I bet on Ferenginar they’d have a negatively progressive tax rate.

In other words, they wouldn’t have a progressive tax rate, they’d have a regressive one.

On this scheme, your tax rate would be higher if you make less money and lower if you make more money. Someone in a lower income range would be paying the 40% (or whatever) and someone in the higher range would be paying 20% (or whatever).

You can just imagine how they’d justify it, too. I can see Quark giving a speech in which he says, “This way it gives the poor an incentive to not be poor any more, to work hard and look for economic opportunities that will let them make enough money that they can get into that next tax bracket. That makes them richer. It makes society richer. It stimulates economic development. It’s better for everybody. Don’t give me your silly Federation ‘morality.’ A progressive income tax rate is positively immoral! How can you be so cruel to your poor as to subsidize their poverty and keep them trapped in it?”

It’s too bad that there aren’t any Trek TV-writing jobs available at the moment. I could probably work a pretty good episode out of that idea, or at least the B story of an episode.

SURPRISINGLY, SOME HU-MONS HAVE EXPERIMENTED WITH REGRESSIVE INCOME TAXES.

They apparently have one in Taiwan.

Y’know how the Federation–or human civilization at any rate–doesn’t have money on Star Trek?

That’s soooo stupid.

And originally, it wasn’t that way. In the original series, there are periodic references to money. Sure, they call their units of money "credits" rather than "dollars" or "yen" or what have you, but it’s money. There are also references to traders, commerce, and even mail-order brides.

And then came what should have been a throwaway line.

In the movie Star Trek IV ("The Search For Whales"), Kirk and the gang are back in the 20th century (remember that one?) and Kirk is going on a sort of date/business meeting with a marine biologist to a pizzeria, and he explains that he’s from the future. She is incredulous and not taking him very seriously, and then when the time comes to pay the check, she says, "I suppose that you don’t have money in the future."

Kirk replies, "As a matter of fact, we don’t."

Funny line! Good delivery by Shatner. And if it had stopped there, everything would have been fine. The line could have been taken as a joke, or it could have been taken as a statement that in the future nobody carries cash (i.e., they all use debit cards or something).

Unfortunately, the Powers That Be at Star Trek chose to take it in a much more literal sense (probably dictated by Gene Roddenberry’s over-optimistic secular humanism), and so it became canon that they don’t have money at all in human civilization. Instead, as articulated in Next Gen and DS9, the human race abandoned money for an economy driven by a mutual desire for improving oneself and the common good.

Riiiight.

All those greedy traders from the original series like Cyrano Jones and Harry Mudd were driven by a desire for mutual self improvement. That’s what led them to unleash ecologically unsafe life forms (tribbles), traffic in contraband substances (magic beauty crystal drug thingies), and risk jail and stuff.

The difficulty of making Star Trek over into a Leninist workers paradise has problems that go way beyond continuity problems, though. The basic problem is that Leninist workers paradises don’t work. That’s why the Soviet Union early on abandoned its efforts to have a cashless society and reintroduced the use of money.

Money plays a vital role: It tells you how much somebody wants something that is in short supply. Person A wants to have something that Person B also wants to have (say, a nice fluffy tribble that has been safely neutered). Who wants it more? Money is the best way to settle that. (Fisticuffs not being a good way.) You want this tribble? How much are you willing to pay for it? Supply and demand.

Even monkeys can get the principles involves.

A society of humans couldn’t be more advanced than us and yet lack money. Whether  cash or electronic, money is the most efficient way of settling how wants what how much and thus who gets it. It’s the best way to organize resources on a wide scale. Any other system is going to be inefficient and result in the misallocation of resources and greater human suffering.

Star Trek is able to ignore this because it is held to such low standards of realism, but no human society built on a touchie-feelie, moneyless self improvement philosophy could possibly work. We know. We’ve tried them. They all fall apart (usually very quickly). Even the kibbutzim are either changing or dying.

Even with the low-realism standards of Star Trek, though, the problem shows through. There are episodes of DS9 (whose writers hated the moneyless business) where the problem is thrown into sharp relief. How could it not be?–when some of the principal characters on the show are Ferengi and thus devoted to the pursuit of money.

One of the things that the show just has to ignore is how moneyless humans interact with moneyed Ferengi (and other cultures). Think Quark isn’t going to charge humans for drinks in his bar? Or to use his holosuites? Think again.

This is not to say that the economics of the future wouldn’t look different than ours. Technological change alone would ensure that. If you have replicator technology (which didn’t come in until Next Gen) and abundant energy then the unit cost of countless consumer goods is going to be vanishingly low (even if replicated food doesn’t taste as good as real food), but it will still exist.

And so what should have been a fun, throwaway line in a movie about searching for whales turned into a HUGE, HULKING, ENORMOUS, WHALE-SIZED WRITING PROBLEM FOR THE FRANCHISE.

Sigh.

GET YOUR COPY OF THE RULES OF ACQUISITION.