Posted by Warren Beatty on 15 May, 2012 at 9:02 am. 16 comments already!


I was, the other day, trying to explain the word "fair" to a friend. Suddenly it occurred to me that I was trying to explain the definition from a statistics perspective, and that was the cause of the miscommunication. In statistics, the word "fair" means that probabilities of occurrence does not change each time an action or process (trial) is conducted. If a process is "fair," then exact probabilities of occurrence can be calculated regardless of initial conditions. We statisticians (besides being weird) understand the word "fair" because it has a very precise, unchanging meaning.

That is the reason why, in a Craps game, "loaded" dice always have the same appearance as regular dice, and that they are slipped into the game only when "serious" money is being wagered and the sucker cannot alter his wagering accordingly. Loaded dice are not fair from a wagering perspective because they alter probabilities of occurrence, thereby increasing the probability that the sucker will lose his wager. Besides, even without loaded dice, craps probabilities favor the person running the game. All he has to do is make the payoff, not welsh, if an individual sucker gets lucky.

That difficulty, the definition of "fair,"occurs quite often. As Jim Yardley said, "’Fair’ is one of those warm, fuzzy words that allows the listener to define it to his own personal taste – and the definition changes from one specific case to another."

For example, Obama, during the Democrat Party primary debate, said that he would raise capital gains rates — not because it would increase revenue, but because it was "fair." During the debate, Obama said, "…I would look at raising the capital gains tax for purposes of fairness." He continued, "…I also want to make sure is that our tax system is fair…."

The "problem" is that Obama did not define, precisely or otherwise, his definition of "fair." As Yardley says, we are left with, in this case, Obama’s definition – "and the definition changes from one specific case to another." One thing you will never hear Obama explain is precisely what he means when he uses the word "fair."

In his 2012 State of the Union speech, Obama said, "… or we can restore an economy where everyone gets a fair shot, and everyone does their fair share…." But nowhere does he define what he means by "fair shot" or "fair share." I guess that he wants us to trust that his definition will be "fair."

We are all familiar with the "Buffett Rule."   It states, according to the White House, "No household making more than $1 million each year should pay a smaller share of their income in taxes than a middle class family pays. This is the Buffett Rule – a simple principle of tax fairness that asks everyone to pay their fair share." The site continues, "Warren Buffett, for example, pays a lower effective tax rate than his secretary, and that’s not fair." Please notice that, in the White House definition, there is an inconsistency. The rule states, "…pay a smaller share…." Then the White House definition offers, "… effective tax rate…." So, which definition applies? How can we be "fair" if the rule is arbitrary?

It is quite disingenuous to use the word "fair" when referring to the "Buffett Rule" tax situation. Buffett contributes much more as an absolute amount than his secretary. "Fairness" means an equal share is paid by all – thus fairness would mean that Buffett and his secretary pay exactly the same absolute amount of tax. And that is what the Buffett Rule says – reread it. Will it be "fair" for Buffett and his secretary to pay the same amount, the same share? Whose tax amount will increase and whose will decrease in order to preserve "fairness?"

According to his 2011 income tax return, Obama doesn’t technically fall under the Buffett Rule – his income was "only" $789,684. If you believe that the amount was his entire income, I hold the deed to certain bridge in NYC in which you may be interested! Anyway, Obama’s secretary, Anita J. Breckenridge, earned $95,000 in 2011. Yet she paid a higher effective tax rate than did Obama. And Obama made substantially more than she did. Her tax rate was not much higher than Obama’s but it was still higher. Is that "fair?"

Dr. Walter E. Williams, in "Devious Taxation," wrote, "…the top 1 percent of American income earners paid almost 37 percent of federal income taxes. The top 10 percent paid about 70 percent of federal income taxes, and the top 50 percent paid nearly 98 percent. Roughly 47 percent of Americans pay no federal income tax. Here’s my fairness question to you: What standard of fairness dictates that the top 10 percent of income earners pay 70 percent of the income tax burden while 47 percent of Americans pay nothing?" It sure doesn’t sound like everyone, as Obama said in the State of the Union speech, "does their fair share."

As Gary Wickert, in "Defining ‘Fair’ in Obama’s ‘Paying a Fair Share’ Rhetoric" wrote: "Precisely what our president means by "fair" remains unclear – clouded in social envy, class warfare, and populist rhetoric. But one thing is certain. The so-called wealthy are paying a disproportionately higher amount of taxes even when compared to their share of the income – far more than their "fair share."

Further, the statistical definition of a "fair game" is one that has an expected value (EV) of zero. For example, consider the wager in which a person tosses a "fair" coin and wins $1 if heads appears and loses $1 if tails appears. The EV = 0.5*$1 + 0.5*(-$1) = 0. In this game, the word "fair" refers to the fact that each time the coin is tossed the probability of the face appearance remains at 50%. We could, even if the coin was weighted so that heads appeared (say) 70% of time, adjust our wagering so as to make this a "fair game." The key concept is that the probability of occurrence remain unchanged each time the coin is tossed.

This is how Obama sees the US and world economy – a zero-sum. In order to be "fair," Obama wants to redistribute assets that the rich obviously stole from the poor, the defenseless. He even formalized his view. On the world economy, R.A., in "Free exchange," wrote that Obama said in his State of the Union speech: "Don’t let other countries win the race for the future." About this statement, R.A. says, "A zero-sum world is a world without hope, and if Mr Obama is convinced that’s what we’re in then I don’t see much need for him to stick around."

Obama chides corporations that are "sitting on" vast quantities of cash. They are waiting for a precise definition of "fair." They will not get that definition until November, 2012, when Obama is voted out of office.

The bottom line is, as Jim Yardley says, that the listener (and, in this instance, the declarer) gets to use the word "fair" and define it to his personal taste. And, with Obama, the definition is constantly changing.

But that’s just my opinion.

"It isn’t so much that liberals are ignorant. It’s just that they know so many things that aren’t so." – Ronald Reagan

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