Bad Wishes

I've never met Dr. Thomas Sowell, though over the last few years I've read so many of his books and articles that I feel I've come to know him. I credit him with lifting a good deal of the fog that still remained over much of the world of economics after I left college. (Note: I do not blame my Alma mater for the knowledge gaps that remained after graduation. I was working toward an engineering degree with only so many electives. Some things I had to sacrifice to finish in a timely manner.)

Dr. Sowell,. along with the help of his fine research staff, helped me to understand the importance of incentives in an economic system, and in pretty much every other system involving people for that matter. (You could make a case I suppose that just about any system involving people is an economy of one kind or another, but no need to cloud the issue too much.) People respond to incentives. Specifically, if you make something more costly in terms of money or whatever else it is that people value, you will get less of it. If you make it less costly, you will get more of it. That sounds obvious, and it is. Still, you'd be amazed how many people either forget or do their best to ignore that simple statement of fact. And in doing so, we are all subject to the consequences.

Take the matter of unemployment, for example. Politicians have built entire careers championing such issues for centuries, and yet the debates continue as emotional and unresolved as ever. You can debate endlessly about what kind of programs should be employed to reduce unemployment, the merits of each, the morality, and so forth. Or you can simply bypass the debate, and follow the principle. If you make unemployment more costly to the people receiving it, you will have less people taking unemployment. If you make it less costly, you will have more people taking it.

As I said, I'm just addressing the principle effect here, and not trying to evaluate the moral effects of taking action in any situation. I'll probably get around to a number of specifics in later blogs. For now, just be aware that a simple answer to most problems in society is usually close at hand. It probably won't be an easy answer, but it will be simple.

There is, of course, a joker in the deck of life. That would be government. Government is unique in several ways. One way is that government gets to artificially create incentives where none existed before. Ethanol is a good example. Government subsidies artificially lowered the price of ethanol production to make it somewhat competitive to gasoline production. Another way that government is unique is that it has legal ability to use force as an incentive. That's not necessarily a bad thing. When you are trying to deter crime, the threat of a little force can be very persuasive. When it causes your insurance policy to be cancelled, you might find the benefits a little less convincing.

Ideally, in a free society there is minimal government regulation and people are generally free to choose which incentives they respond to. As the country stands today, government force is expanding into more areas than ever before, and some that we are probably not even aware of. And the reason that this happens is that someone wants it to happen. Some of the desire is indirect. I don't know of anyone who wakes up in the morning saying "I hope the government takes away more of my freedom. I think I'll vote for that." But every regulation enacted and law passed involves costs, both in money and liberty. That doesn't mean that laws are bad. Laws are essential. It simply means that there will always be a trade off between law and freedom. Since governments enact laws to solve problems, government solutions necessarily involve less freedom for the people. Give the government enough power to solve everything, and the people may be the last problem it has left.

Regardless of the trade-offs, more people are demanding government solutions. Thinking for yourself, taking care of yourself is hard work. America is now joining much of the world at the crossroads asking "Is it worth it?" Is it really worth all the struggle when we are really in an age where a government can just about provide for everybody's  needs?

Be careful what you wish for...