The Robin Hood Effect Theory

The Robin Hood Effect Definition

By Kriss
Published on: July 19, 2021

The Robin Hood effect is an economic situation whereby wealth is stolen from the rich to give to the poor in society in order to reduce economic inequality. The Robin Hood Effect entails the redistribution of wealth in the economy in which the poor acquire more financial stability at the expense of the rich. The Robin Hood effect is named after Robin Hood, who in history stole from the rich to give to the poor. The reason for this act is borne out of the belief that the rich became wealthy by stealing from the poor through diverse means, hence, in order to redistribute wealth, the poor must gain at the expense of the rich.

A little more on what is the Robin Hood Effect

The Robin Hood effect is associated with wealth or income inequality, this phenomenon is based on the poor gaining economic and financial stability at the expense of the rich. When the rich (those who are better-off) gain at the expense of the poor (less well-off), this is a reverse of the Robin Hood effect. The main objective of the Robin Hood effect is the redistribution of wealth and income in an economy so that inequality is reduced. Certain Fiscal policies can also give rise to the use of the Robin Hood effect. This purpose effect is achieved when policies that are in the best interest of the public are enacted. For instance, when the government collects higher taxes from the wealthy and lower and no taxes from the poor, the Robin Hood effect is attained.

Objectives of income redistribution

The core objectives of the Robin Hood effect are highlighted below:

The redistribution of wealth and income in an economy.
To create a reduction in economic inequality and provide more opportunities for those who are less well-off in society.
To relieve the burdens of the poor and make them gain more financial stability at the expense of the rich, such as a reduction in taxes paid by the poor and increase in taxes paid by the wealthy.
The Robin Hood effect also support that provision of public services funded by the tax paid by the rich, such provisions will be benefited by the poor members of the society.

As the time passes by, cryptocurrencies (especially Bitcoin) are becoming more accessible for all the people, not only the super rich and highly educated crypto and investing fanatics. In fact, cryptocurrencies are actually leading us to a better, less unequal economy. How, you might ask?

Because of the phenomenon called the Robin Hood effect. The Robin Hood effect is an economic occurrence where income is redistributed, so that the economic inequality is reduced. The effect is named after Robin Hood, said to have stolen from the rich to give to the poor.

We’ll explain to you how it works in real life.

1. More transparency of transactions

As all blockchain and cryptocurrency transactions are very much automated and digital, they are trailed in a distributed ledger without any exception. The system can’t be manipulated by either individuals or companies, which hugely reduces the risk of frauds and any kind of meddling. That means that the less developed countries will also have better chances of improving their economical and social outlooks for the future. What’s more, we will all be able to keep track of where the state reserves are directed and therefore have a say within their own political climate.

2. A much lower costs of transactions

As Bitcoin doesn’t need an actual physical bank house to exist, the transaction expenses are very small. Bitcoin doesn’t need to pay for any employees, utilities or rent, so there is no need for huge fees. This in order makes more people have more confidence in trusting these new financial tools. More trust creates more transactions, making for the global economy to be more closely connected.

3. Blockchains allow more control to entrepreneurs

Never has there been a more brilliant time to do business than it is right now. Blockchain technologies and cryptocurrencies can (and already do) help many entrepreneurs receive payments in more currencies.

The world is changing at an unprecedented rate. The speed at which cryptocurrencies are taking over is a clear indicator that traditional financial institutions can’t dominate so well any longer, other financial needs are soaring and need to be focused on. Likewise, the world is facing an expanding need to remove the borders to build a complete social and financial inclusion. And cryptocurrencies have all the possibilities needed to address such issues.

It will not be long until Bitcoin and other cryptos find a way into all of our lives, changing them for the better and giving us the economic growth and inclusion we need. Billions of people will soon have the opportunity to easily invest, send money across country borders, save money and initiate businesses thanks to the marvellous possibilities that cryptocurrencies offer us.

4. Better circumstances for inadequately banked countries

It might come as a surprise that more than a third of the world population still does not have any access to even the basic banking services such as loans, checking accounts etc. Those people who are mostly already financially struggling typically tend to use expensive and untrustworthy loaning methods. The interest rate of these methods is anything but reasonable, which then leads to more problems for the people who took the loan. This is where cryptocurrencies could help with their high volatility and ease-of-use.

There are now innumerable apps and services that assist the use of cryptocurrencies and make them easier to understand to the wider audience. Another advantage of cryptocurrencies is that it’s completely decentralized, meaning that trading can be done across borders for free. The use of technology will help to equalize a financial revolution that will eventually make all of us more financially connected, empowered and enabled.

5. A favorable increase in economic activities

We do already have a whole industry of institutions committed to supervising all the digital coin exchanges happening throughout the globe. The growth rate of cryptocurrencies is extraordinary. It could be confirmed by the early crypto adopters who became very rich overnight and discovered possibilities to grow financially. Bitcoin, the most famous of these skyrocketing cryptocurrencies, has already helped many people and companies to expand and bloom, including many, who also have trading as their main source of income. Our world economy is slowly, yet surely shifting to adjusting to our unsatisfied needs and cryptocurrencies have a great potential in satisfying them.

So, in conclusion, with creating more equal opportunities and access to finances for everyone in the world, cryptocurrencies could be seen as a modern day Robin Hood. And we’re really happy about that.

Kiara Sofia Smith

My current focus is blockchain technology and cryptocurrency. One could even call me a blockchain “enthusiast.” I have worked for almost a decade on several financial projects related to the stock market news, fundamental research and technical analysis for several blogs.