# Question about the effect on economic productivity due to a hypothetical wealth distribution requirement

Assume a sovereign state that functions like a joint stock corporation does: it will be comprised of shareholders and its "stateshares" will have a market value since they are tradeable. Now assume that most wealth has to be held in these stateshares. This means if your private wealth goes up 10% in market value, then you will need to increase your stateshare wealth by 10% to make sure most of your wealth is always in stateshares. The point of this hypothetical regulation is to make sure the aggregate economic interest in increasing the stateshare market value is larger than all the other aggregate economic interests combined.

Now the question is about this hypothetical regulation's effect on economic productivity. The argument is that because a capitalist will have to either sell off or mortgage part of his quickly appreciating asset to afford to buy an asset appreciating at the average rate, then the incentive to create a quickly-appreciating asset disappears. Thus, economic productivity disappears.

This argument is not convincing to me though. I believe the incentive to grow my own personal enterprise is still strong even though I would have to mortgage part of my enterprise as it grows in value to buy more stateshares.

Are my doubts correct? If not, why does economic productivity suffer under this hypothetical mandatory wealth distribution?

• "stateshares will have a market value since they are tradeable" I don't see why these would have market value at all. To get around regulations my friend and I will sell a stateshare to each other for \10^{23}\$, thus this becomes the new price. Now everyone who owns a stateshare has fulfilled the regulation. As stateshares have no other function at all, they do not give dividends or voting rights, no one will buy any, for any price. Thus the market is in equilibrium. – Giskard Jun 10 '19 at 7:03
• "sell off or mortgage part of his quickly appreciating asset to afford to buy an asset appreciating at the average rate, then the incentive to create a quickly-appreciating asset disappears" I have heard similar talking points from high-salaried people: What is the point of working if the state takes x% of your salary? Well, the point is to get 100-x% of the salary (if you do not find the work satisfying in itself). The incentive is lessened, but does not disappear. – Giskard Jun 10 '19 at 7:05
• @Giskard, my question is not about the service dividends stateshares would provide, but about the effects the regulation of most wealth having to be in stateshares would have on economic productivity. It is a 50% capital gains tax, essentially, rather than an income tax. And your wealth is not being taken away, just put into a different investment class that you still own. So doubly dissimilar to an income tax. My argument is that it doesn't affect productivity at all. – Hierarchist Jun 10 '19 at 17:11
• I don't see how your response addresses either of my comments. I hope others do and will provide answers to your question. – Giskard Jun 10 '19 at 17:27
• @Giskard, yes I do hope that someone addresses my question. – Hierarchist Jun 10 '19 at 17:31