We are crew members of an oceangoing vessel sailing the high seas. Our ship runs aground on an uninhabited island and is irrevocably damaged. We must spend the rest of our days on the island, a self-contained community.
Our new homeland is special, however, for scattered on the beach are hundreds of gold coins! Naturally, those members of the crew who happen first to the beach hastily collect the coins. Within the hour, they have gathered them all up. Those who happen to be sleeping or sick or manning the pumps when the coins were discovered have none.
In the evening, a meeting of the entire crew is held to discuss themes of wealth, poverty, and the proper role of government. Under the circumstances, what views seem just and reasonable?
We see at once that the coins represent a natural endowment of the island. Those who collected them did no noticeable work; they were simply lucky bystanders. Hence, as a basis for our subsequent discussion, we enunciate these self-evident propositions:
- The wealth of a community is rightfully the property of the entire community.
- The rich are undeserving of their wealth.
As we turn our attention to poverty, we recognize that, again, it was simply a question of luck. That a crew member has no coins in no way reflects on his productivity or his contribution to the community. He just didn't happen to be around when the coins were being gathered. Hence:
- The poor are undeserving of their poverty.
If the poor are not responsible for their plight, who is? Almost as soon as we raise the question, we see the answer. The rich are not innocent in the luck they have enjoyed. By picking up the coins themselves, they have precluded the others from doing so. The quantity of coins being fixed, a zero-sum rule applies: the more one gets, the less another can have. Envy of the rich, it turns out, has logical basis in our community:
- The rich are responsible for the poverty of the poor.
It does not take us long to decide what principle should govern the allocation of wealth on our island. Since the coins are community property, uncreated by any of us, they are equally owned by each member of the community. Hence:
- The wealth of the community should be distributed equally among the members.
We find, however, that when we propose this rule, those who already have the coins selfishly refuse to part with their excess. What, then, should we do? Obviously, we must create an apparatus of coercion-a government-to take the coins from them and spread them equally among the crew. In establishing this system of coercion, we announce our purpose:
- The principal function of government is to redistribute wealth, taking from the rich and giving to the poor.
Where does wealth come from? In the above story, I pose a hypothetical answer to this question: wealth is a natural endowment that fortunate bystanders happen to collect. Is this assumption true to life? Strangely, many people appear to believe that it is. They have succumbed to the "endowment illusion"-belief that the wealth of a community is fixed and is bestowed upon it by natural processes. Upon this premise, they found their deductions about economic life.
I have called this belief an illusion because it is not an ordinary type of error. It is not a mistake that, once pointed out, is henceforth avoided.