Perspectives Matter - Economics in One Lesson
Does your perspective matter? Your perspective represents your ideas, interests, values, desires, wants, needs, priorities, concerns, fears, hopes, dreams, goals, experiences, preferences, and partial knowledge. Does all that matter? Here are your options...
1. No, your perspective does not matter
2. Yes, your perspective does matter
Let's consider both possibilities.
1. No, your perspective does not matter
If your perspective does not matter then one use of your limited resources is as good as any. Therefore, it shouldn't matter if congress uses your taxes to clog toilets.
2. Yes, your perspective does matter
If your perspective does matter, then one use of your limited resources is not as good as any. Therefore, it's entirely up to you to decide whether it matters if congress uses your taxes to clog toilets.
Here's the paradox. You can't choose which government organizations you give your taxes to. Therefore, your perspective does not matter. In order to resolve this paradox you have to figure out why your perspective matters in the private sector but not in the public sector. Why would the "best" use of your limited resources matter in the private sector but not in the public sector? Why would economics, otherwise known as the study of scarcity, matter in the private sector but not in the public sector? Either economics matters...or it does not. Either your limited resources matter...or they do not. Either your perspective matters...or it does not.
Too Many Eggs in One Basket
Let's consider a situation where people's perspectives did not matter at all...socialism. A committee of government planners tried to determine the "best" uses of an entire nation's resources. The result? Epic fail. Why though? Simply because putting too many eggs in one basket minimizes rewards and maximizes risks. We all have unique perspectives...yet we all make mistakes...aka fallibilism. This is why it's not a good idea to put too many resources in the hands of government planners.
What about our system though? Our system is a mixed economy. We have two sectors...the private sector and the public sector. In the private sector your perspective matters...you can determine the best use of your limited resources. In the public sector, however, your perspective does not matter...you cannot determine the best use of your limited resources. In essence, we follow the rules of economics in the private sector but not in the public sector. What do you think the results are of disregarding the rules of economics in the public sector? What do you think the consequences are of disregarding 150 million taxpayer's unique perspectives?
The consequences are substantial fails, depressions and recessions, which represent the misallocation of substantial resources. Think about it on the individual level. Let's say that you make a mistake and gamble your home on a failed business idea. What are the results of putting all your eggs in one basket? What are the consequences of misallocating your resources? You lose your home. But do any of your neighbors suffer from the consequences of your mistake? Nope.
Individuals and corporations simply do not control enough resources to cause substantial failures. On the other hand, our committee of government planners, aka congress, does. If the tax rate is 25% then we can imagine that 538 people control 1/4 of our nation's resources. That is too many eggs in one basket. Our mixed economy is part socialism...and we understand exactly why socialism fails...so why is it any surprise when our system substantially fails? Yet, what happens when substantial failures occur? Each party conveniently blames the other party. And guess what? You believe them and the pattern repeats itself.
It follows, then, that a less centralized society has the advantage of a greater diversification of its performance across a larger number of preceptors. This is because diversification here dilutes the impact of the ability, or the lack thereof, of each preceptor on the aggregate societal performance. - Raaj K. Sah, Fallibility in Human Organizations and Political Systems
As long as we disregard 150 million taxpayer's unique perspectives, we will have to deal with substantial failures.
Humility vs Conceit
The best analogy of economics, that I know of, is Buddha's parable of the blind men and the elephant. Each blind person was touching a different part of the elephant. We all have access to an essential part of the truth...which is our own unique perspective. Economics, the study of scarcity, only has meaning in terms of our perspectives.
The trick is understanding that our perspectives, while unique, are extremely limited. It requires humility for us to appreciate just how limited our perspectives truly are. People that fail to appreciate just how limited their perspective truly are, can be said to suffer from conceit. These conceited people erroneously believe that other people's perspectives do not matter.
In order to understand the dynamic between humility and conceit, let's consider Frederic Bastiat's perspective and then compare it to Elizabeth Warren's perspective. Here's Bastiat's perspective...
What difference do the results make? That depends entirely on your perspective.
This means that the terraces of the Champ-de-Mars are ordered first to be built up and then to be torn down. The great Napoleon, it is said, thought he was doing philanthropic work when he had ditches dug and then filled in. He also said: "What difference does the result make? All we need is to see wealth spread among the laboring classes." - Frederic Bastiat, The Seen vs the Unseen
What are some good reasons for taxes? That depends entirely on your perspective.
In the first place, justice always suffers from it somewhat. Since James Goodfellow has sweated to earn his hundred-sou piece with some satisfaction in view, he is irritated, to say the least, that the tax intervenes to take this satisfaction away from him and give it to someone else. Now, certainly it is up to those who levy the tax to give some good reasons for it. We have seen that the state gives a detestable reason when it says: "With these hundred sous I am going to put some men to work," for James Goodfellow (as soon as he has seen the light) will not fail to respond: "Good Lord! With a hundred sous I could have put them to work myself." -
Frederic Bastiat, The Seen vs the Unseen
Which brings us to Elizabeth Warren's perspective. As I mentioned in my post on the opportunity costs of public transportation...she provides a perfect example of somebody who is conceited. Here's the famous bit from her speech...
When James Goodfellow gives a hundred sous to a government official for a really useful service, this is exactly the same as when he gives a hundred sous to a shoemaker for a pair of shoes. It's a case of give-and-take, and the score is even. But when James Goodfellow hands over a hundred sous to a government official to receive no service for it or even to be subjected to inconveniences, it is as if he were to give his money to a thief. It serves no purpose to say that the official will spend these hundred sous for the great profit of our national industry; the more the thief can do with them, the more James Goodfellow could have done with them if he had not met on his way either the extralegal or the legal parasite. - Frederic Bastiat, The Seen vs the Unseen
Do you think that Elizabeth Warren knows better than James Goodfellow what is and isn't essential for the successful operation of his business? Why would anybody want their business to fail? Why would anybody want their country to fail? If Goodfellow has to pay taxes anyways...then why wouldn't he spend his taxes on the public goods which benefit his business the most? If we have to pay taxes anyways....then why wouldn't we spend our taxes on the public goods which benefit our country the most?
I hear all this, you know, “Well, this is class warfare, this is whatever.”—No! There is nobody in this country who got rich on his own. Nobody. You built a factory out there—good for you! But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along. - Elizabeth Warren
If our perspectives do not matter then our country does not matter. Value only has meaning in terms of our perspectives.
Pragmatarianism = choose where your taxes go!