Taleb says rich should not pay more tax to help the poor
A US academic billed as David Cameron's new intellectual guru takes a Darwinian approach to economics and says it is wrong for the rich to pay higher taxes to help the less well-off.
Nassim Nicholas Taleb, a professor of risk engineering at New York University, attacked Barack Obama for increasing his tax bill as part of a series of anti-recessionary measures.
The remarks by Taleb, the conservative author of the book Black Swan, were made during an appearance with Cameron at the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA) on Tuesday.
Labour attacked Cameron, who says Taleb's work confirms his own prejudices, because the "eccentric" academic says economic crashes are a good thing.
In some of his most provocative remarks at his appearance with Cameron, the Lebanese-American academic criticised Obama for increasing his taxes as he harked back to Darwin's theory of evolution.
"I happen to do OK. I am paying more taxes," Taleb said. "How can you have evolution if those who do the right thing have to finance those who did the wrong thing? If you are making money in 2009 – that means you have a robust business in the cycle – you are paying more taxes. If you are losing money in 2009 you get a bigger tax break. It is the opposite of everything I believe in."
Taleb has become a conservative folk hero following the success of his book, which examines the phenomena of "Black Swans" or "low-probability, high-impact events" that can have a major impact on the world.
Cameron praised Taleb and said his book had confirmed his own prejudices. "I very much enjoyed Black Swan. I am trying to come to terms with Black Swan thinking and what it might mean for politics … The danger with reading somebody's book is that it just confirms some of your prejudices and that is why you like it," the Tory leader said.
But Taleb has beliefs which are outside the political mainstream in Britain. These include:
• Economic crashes are a good thing. "I like crashes. I just like the world to be robust with them. The world is not robust. In 2000 Silicon Valley was very robust."
• Debt is nearly always dangerous. "Christianity early on did not like debt. Islam banned debt. It is not without reason. The Romans had problems with debt. A lot of wars were caused by debt. So debt was not necessarily a good thing. You say in moderation. But we don't know what moderation is."
• Climate change may not be man-made. "I'm a hyper-conservative ecologically. I don't want to mess with Mother Nature, OK. Even I don't believe that carbon thing is necessarily anthropogenic [man made], right. I just don't want to mess with Mother Nature. I don't understand Mother Nature. It is much more intelligent than us. It has been around for longer than anything else." Cameron made clear he disagrees with Taleb on this.
Taleb yesterday criticised the British press for the reporting of his remarks, saying they may have become "lost in translation". His views on economic crashes had been distorted, he said. "I said that free markets generate fads, crashes, massive movements. Attempts to control the cycle proved futile – what we need is citizens to become robust to them, to be immune to their impact. My point is that we cannot predict Black Swans, but we know their impact and can be prepared for them. Again taken backwards: 'Taleb loves crashes'. This is incompetent journalism in its most insidious form."
Climate experts and bank risk managers have both failed us
I'm not a denier. We just do not know the consequences of our actions
I am honoured to see my conversation with David Cameron at the RSA covered in your paper (Cameron's guru says rich should not pay more tax to help the poor, 20 August). However, your reporting was in complete reverse to my positions on three subjects.
First, you say I believe that "Climate change may not be man-made"; and Lucy Mangan describes me as a "climate-change denier" (This week, 22 August). In fact, ecologically I am hyper-conservative (meaning super-Green), and I am one of the authors of the King of Sweden's recent Bönhamn declaration on attitudes to climate change. My position on the climate is to avoid releasing pollutants into the atmosphere, regardless of current expert opinion. Climate experts, like banking risk managers, have failed us in the past in foreseeing long-term damage. This is an extension of my general belief: "Do not disturb a complex system." We do not know the consequences of our actions (this idea also makes me anti-war), and I have explicitly stated the need to leave the planet the way we got it.
Second, I was portrayed as someone who "loves crashes". By coincidence I spoke at the same venue, the RSA, two and a half years earlier – well before the current crash – as part of my crusade against the risk of financial collapse. I find it depressing that the British public could have saved a trillion pounds and hundreds of thousands of jobs had these hidden systemic risks been addressed.
My position is that a robust system needs to produce frequent crashes, with citizens immune to them, rather than infrequent total collapses which we cannot cope with. By constraining cycles and assuming "no more boom and bust" (as your current government did) you end up with a very large bust – and I am sure that I do not need more events like the recent crisis to prove the point.
Thirdly, I was quoted as saying "How can you have evolution if those who do the right thing have to finance those who did the wrong thing?" But this is not the same as saying "[the] rich should not pay more tax to help the poor", as your headline stated. I spent 13 years fighting bankers' bonuses (when no one else did) and am currently crusading for past payments to be clawed back. I have also shown how regular taxpayers have been financing millionaire bankers' bonuses: "socialism for the losses, capitalism for the profits". We are still financing those who got us here, with tax hikes on those who do the right thing, and larger tax breaks for those who blew us up. Companies who made mistakes and weakened the system are being subsidised by the countercyclical ones who make it more robust.
Nowhere do your articles discuss my central idea, that the risks that were in the system two years ago are still with us now, and that unless we lower debt to "definancialise" the economy (instead of increasing deficits through stimulus) we face more risks of blow-ups. With the same distortion of views one could easily make Karl Marx an apologist of capitalism and Adam Smith a promoter of communism.