Why Robin hood was a sucky economist

To be fair he wasn't an economist.He however must have had some knowledge of economics being of nobility and everything.

This is a legend of a man who hated inequality in the wealth distribution. His major point of discontentment was the rich should not be taking from the poor. And hence in all his wisdom, he decided to rob the rich. The story has an appeal because it lets one fantasize about shift in power balance that otherwise is not possible in real life. But from an economic perspective it is one of the most idiotic policies. Here is what he did. He looted the rich and gave it poor. Splendid thoughts but hardly the solution to anything. In fact if anything he just brought more agony to the already suffering and almost certainly ensured his imminent capture.

Consider this. The money which is looted is distributed to poor freely and i guess in a justified manner. However the point still remains that the money though distributed equitably was not earned. Rob frequently enough and distribute it as many times and the poor recieving the money have no incentives for doing any productive work. Which basically leads to a point where there will be a deliberate attempt to remain poor so that one can receive the freebies.

A recent example of this menatlity was to be found in TOI which argued that the cost of India's growth is that we will now  no longer be considered a poor nation and hence will not be eligible for the low interest loans from world bank and IMF. This is a curious case of choosing to remain poor mentality that in the long run causes irreparable damage.

The domino effect is thus-

1.       Robin robs the rich and gives to the poor few-

2.       The poor few feel no incentive to upgrade. In fact they see the incentive to remain poor

3.       the many who are just above the poverty line do a cost benefit and arrive at conclusion that their efforts are not worthy of rewards and promptly downgrade themselves to being poor. the relative no. of poor people increases hence causing social backwardness on the whole 

However still focussing on economics , what now happens is two things:

1.       Since more no. of poor are there , this means that to support them, Robin has to commit more robberies. That may not be possible assuming rich have a good learning curve and now they figure various protections and it almost certainly raises the probability of Robin being caught as he is now stealing more times

2.        Since there will be less money per head because of increased no. of poor, it will certainly bring in play the prisoner’s dilemma game where the maximum payout occurs in a I win –you lose situation. One of the poor will most definitely rat out  Robin to gain the state reward and in process get rich much more quickly and in much more amount.

So Robin’s good deed will probably lead to his capture. 

But economics always happens in twos. Buyer Seller, Supply Demand etc.

So coming to the other facet of the story-the story of the victims-those who were robbed. What is happening to them? Are they terrified of becoming poor? They don't need to be. Because the model that they earn their wealth is by Taxing the poor. Hence out of the possible solutions to their problems few of them would be:

1. Increase the tax and hence bring more pressure on the peasants and the poor. This will help them economically in terms of filling up the deficit of robbed accounts and create a social pressure where peasants begin to blame Robin for there misery thereby letting Prince john defeating his idealogy without so much as raising a sword

2.Increase the efficiency of tax collection and hence collect more effectively from a wider base of people.This will certainly bring all the beneficiaries of the robbing into the tax net and eventually the money looted will end up with the state treasury in form of taxes

3. Get state control of all the farm and business produce and make the state sole seller of food items.Since the money will primarily be used to buy food all the money looted will come back as net reciepts. All that the state will have to do is absorb the increased recievables time frame :)

4.More like an extension to the third point. If the state gains control over all the produce and hence establish a monopoly, history suggests that there is bound to be a rise of a parallel economy or a black market! what this would essentially do is give rise to criminal elements who will start getting wealth because of smuggling etc. Now ideally they would not touch Robin hood as he is the reason why state has the control of all the supply but being of the moral kind it is safe to assume that Robin will try to stop the black marketeers. This most essentially will open another front of war for him.Whether he wins this one or not, he will be considerably be weakened.

But would Prince John have taken any of the steps above? The beauty is this that the moment Robin hood decided to steal from rich and give it to the poor, the need for Prince john to do anything disappeared.Robin in long term would have had to take these very steps because he has incentivised remaining poor and he has in effect stopped the pipeline of growth by ensuring people at the bottom do no value adds to their skill and there is no productive work. Also the rich have probably got their hint, convert their holdings into gold, will now fund some of  King of england's wars and earn pretty good returns.

But will any of the above ever happen ?Yes.

This essentially is the story of USSR.

"If someone were to ask me to define Ecnomics, i would define as the study of incentives and the dynamics of applications of incentives.

And this is where I believe that much that is wrong in this world is becuase of not so well thought out incentives and unimaginably incongruent application of economics"