Politicians Pretend Human Nature Is Different Than Reality

       Do not think about, write about or deal with  human behavior without determining the effects of incentives.

   Elections should be held on April 16th – the day after we pay our income taxes. That is one of the few things that might discourage politicians from being big spenders." – Thomas Sowell

    Wherein we see some principles of economics ignored by politicians and voters.

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    Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.

    1. Many things that are desirable are not feasible.

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    If “social justice” requires wealth transfer, money must be borrowed

    2. Individuals and communities face trade-offs.

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         Deficit now, taxes later.

    3. Other people have more information about their abilities, their efforts, and their preferences than you do.

    4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

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    Reward sloth–get sloth–punish productivity–get less of it.

    5. There are tradeoffs between equality and efficiency.

    6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well meaning outsiders to change things for better or worse.

    7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.

    8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.

    9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).

    10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.

    11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).

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    As Bastiat says, “Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.

    12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.

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    Unrecognized tendencies of Human Nature are ignored at everyone’s peril.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson, Ph.D.
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies

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