- - Wednesday, July 10, 2019


Reversion to the mean. It’s a rather boring and arcane mathematical principle that explains so much. Reversion to the mean basically boils down to the idea that extremes ultimately converge in the middle somewhere — at their mean. For example, the great baseball star Babe Ruth had a season where he only hit two home runs. Likewise, he had a season where he hit 60. However, over his 21-year-professional career he averaged about 34 per season, and most years he hit between 35 and 45. Reversion to the mean.

Let’s apply this law to see what Elizabeth Warren, Bernie Sanders, and the Social Democrat crowd are really up to. If you can’t afford to pay your student loan, they want you to be able to just walk away from your debt. If you can’t afford health care, or if you’re not even a U.S. citizen, they want you to get it for free. Those are the folks hitting two home runs a year.

But, who ends up paying for the free, free, free stuff? That’s the 60 home-run-extreme-year question. Elizabeth Warren wants to tax the net worth of folks — like William the Conqueror tried with the Domesday Book at the end of the Dark Ages. Bernie Sanders wants to tax stock and bond transactions, and recently admitted he’d also raise the income taxes of the middle class. And the rest of the crowd with torches and pitchforks have similar plans to play Robin Hood by taking from the “rich” and giving to the “poor.”

Now back to the math. We’ve identified our social extremes, and by applying the law of reversion, we know the outcome will be the mean, or, better stated, “average.” That’s really what their plan is — to make everyone average. The rich get poorer, and the poor become average. Actually, their utopian dream is for the rich to become average, too.

Taking a more global perspective, this means that as other countries advance and champion their citizenry, the Social Democrats want the United States to regress and become economically average. No, this isn’t about screaming “MAGA!” It’s about simply applying math. As countries like China and India see close to double digit GDP growth, we cheer at barely topping 3 percent.

Transferring wealth and income across a population does not grow its economy. Everyone in Venezuela and Cuba are average and equal — equally poor. Their socialist economies aren’t growing, they are shrinking or, at best, flat. Reversion to the mean applies in the macro sense as well as the micro. Taxing the rich to make them poor makes the entire economy poor.

Nobody disputes that providing access to higher education is a good thing. And, yes, in theory a more educated population is more productive and therefore its GDP should grow faster. But statistically that’s not the case.

The World Population Review ranks Canada, Japan and Israel as the most educated folks around, yet their respective GDP growth rates are dismal hovering around 1 percent. And, what do these highly educated, low-economic growth countries all have in common? Free health care for all, free or, almost free, college education for all, and tax rates significantly higher than in the United States.

High-growth countries reward success; they don’t punish it with taxes. Likewise, high-growth countries do not seek to be average, they champion achievement. It does sound wonderful for everyone to enjoy free college and free health care, but nothing is free — somebody has to pay. And when those transfer payments are made, the population approaches becoming average. Reversion to the mean.

• Kevin Cochrane teaches business and economics at Colorado Mesa University, and is a visiting professor of economics at The University of International Relations in Beijing.

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