Wednesday, October 10, 2012

The Interests of Consumers are the Interests of the Human Race

A lunch lady over in a Swedish public school was reprimanded for doing her job too well.  But not only did she have the audacity to do her job too well...she also had the audacity to summarize the value of capitalism too well...
The food on offer does not always suit all pupils, she explained, and therefore she makes sure there are plenty of vegetables to choose from as well as proteins in the form of chicken, shrimp, or beef patties.
Right now the schools on offer do not suit all pupils...just like the books on offer do not suit all readers...just like the movies on offer do not suit all watchers...just like the musicians on offer do not suit all listeners...just like the clothes on offer do not suit all the fashionistas...just like the medications on offer do not suit all patients...just like the plants on offer do not suit all horticulturalists...and so on and so on. 

As consumers we never want less options.  Instead, we always want a larger selection of different things.  Why do we want different things?  Because we are an extremely heterogeneous bunch.  We are a melting pot of diverse perspectives, cultures, preferences, tastes, values, interests, concerns, hopes and dreams.  Our amazing diversity is our greatest strength because it leads to a greater abundance of the things we value.  

Over 100 years ago Bastiat explained this concept too well...
If we now turn to consider the immediate self-interest of the consumer, we shall find that it is in perfect harmony with the general interest, i.e., with what the well-being of mankind requires. When the buyer goes to the market, he wants to find it abundantly supplied. He wants the seasons to be propitious for all the crops; more and more wonderful inventions to bring a greater number of products and satisfactions within his reach; time and labor to be saved; distances to be wiped out; the spirit of peace and justice to permit lessening the burden of taxes; and tariff walls of every sort to fall. In all these respects, the immediate self-interest of the consumer follows a line parallel to that of the public interest. He may extend his secret wishes to fantastic or absurd lengths; yet they will not cease to be in conformity with the interests of his fellow man. He may wish that food and shelter, roof and hearth, education and morality, security and peace, strength and health, all be his without effort, without toil, and without limit, like the dust of the roads, the water of the stream, the air that surrounds us, and the sunlight that bathes us; and yet the realization of these wishes would in no way conflict with the good of society. - Bastiat, Abundance and Scarcity
The problem is...just like superman...our diversity has a kryptonite.  If somebody takes away our freedom to choose...then they'll render our diversity powerless.  Without being able to choose how we spend our money...then how can producers know when they are producing something that we find suitable?  Without an accurate feedback mechanism then limited resources will be wasted.  This is the problem with representative economics.

Right now we elect 538 people to represent the economic interests of 150 million taxpayers in the public sector.  In other words...we permit 538 people to spend 1/4 of our nation's revenue in the public sector.  That's over $3.5 trillion dollars being spent without an accurate feedback mechanism.

Clearly we don't all agree on how that $3.5 trillion dollars should be spent in the public sector...but that's a good thing.  Yet...people think it's a good thing when conservative and liberal representatives set aside their differences to solve the problems that our country faces.  Eh?  It's a good thing when we force 538 representative to agree on how they spend our money in the public sector?

If our diversity is our greatest strength in the private sector...then why is it a good thing to demolish our diversity in the public sector?   How does forcing people, who have very different perspectives, to tackle the same problem from the same angle help anybody?  It doesn't.  It hurts us all.  We all benefit from multiple approaches because it increases the probability that one approach will be successful.

The value of heterogeneous activity...aka hedging our bets...aka not putting all our eggs in the same basket...helps us understand why it would be an improvement to allow taxpayers to choose which congressperson they gave their taxes to and why it would be an exponentially greater improvement to allow taxpayers to choose which government organizations they gave their taxes to.

Bastiat offers an excellent overview...

1. Our economic representatives aren't superior enough to override our choices
2. Public goods, like private goods, are simply acts of exchange
3. The choices of consumers are the driving force behind abundance

1. Economic representatives aren't that superior...
Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority. - Bastiat
If our economic representatives were truly superior enough to know better than millions and millions of consumers...then this would be as true in the private sector as it is in the public sector.  But if you value the options you do have...then you should know for a fact that this is not true.  The options that we have in the private sector are a direct result of our freedom to choose how we spend our money.  Take away our spending decisions and our diversity, which is our greatest strength, will be as useless as superman swimming in kryptonite.

2.  It doesn't matter whether a good is public or's either worth exchanging your money for...or it isn't...
Thus, considered in themselves, in their own nature, in their normal state, and apart from all abuses, public services are, like private services, purely and simply acts of exchange. - Bastiat
Public goods are only different from private goods because we want more of them than we believe that the private sector would be able to supply on its own.  It's not that a non-profit militia couldn't provide national's just that most people are relatively certain that it wouldn't provide enough defense.  It's not that the non-profit sector doesn't provide's just that liberals are relatively certain that it doesn't provide enough welfare.  This just proves that the demand for public goods exists.  Therefore, the problem is on the supply side.  More specifically...the supply would be inadequate because people can free-ride off of other people's contributions to non-profits.  We solve this problem by forcing people to pay taxes and by allowing government organizations to produce public goods.  But once these steps are's completely unnecessary and extremely counterproductive to take the additional step of demolishing our diversity by allowing representatives to determine how our taxes should be spent in the public sector.    

3.  Human flourishing absolutely depends on protecting the interests of consumers...
Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race. - Bastiat
Taxpayers bear the cost of public goods which is why they alone are capable of determining which public goods are worth the cost.  Will they find all their options in the public sector to be perfectly suitable?  No...of course not.  This basic fact will guarantee that taxpayers will support the audacious lunch ladies of the public sector.  It will ensure that the most successful approaches will gain funding and failed approaches will lose funding.  

Diversity + choice = progress.


  1. What a load of useless garbage. Bastiat? Are you in the 4th grade or something?

    1. If I'm in the 4th grade then you should have no problem schooling me. Go right ahead...I look forward to it.