Freakish economics


Simple, really...

A few months ago, I received a letter demanding £6,000. If I didn’t pay it by the end of January, the amount would start to go up. If I still didn’t pay it, I’d have all my possessions taken from me. If that still didn’t cover it, I’d be taken by force and locked up without ransom in an unknown location for months or even years. If I ran, I’d be followed. If I resisted, I’d be shot.

The whole experience was obviously incredibly traumatic, and I had no choice but to comply. The letter, of course, was my annual tax demand…

Only freaks see taxation as extortion or the police as kidnappers, but the only difference is that this is a crime our elected representatives have actually voted for! As one of those freaks myself – we like to be called ‘libertarians’… – I’m used to people disagreeing with me, but I’ve long since given up believing I’m right. I accept that economic arguments are almost always about values and not methods. Who am I to say that something is ‘right’ or ‘wrong’? You can’t prove a ‘should’. Like everyone else, all I have is a strategy for survival and reproduction. Just because my genes (and an early trip to America when I was ten) have programmed me to believe in individual freedom doesn’t mean I should become Chancellor of the Exchequer or Governor of the Bank of England. I just have a problem with authority!

John Rawls tried to finesse the values issue in A Theory of Justice by asking what kind of society each of us would like to be born into. The more equal the society, the less the risk of poverty and ill health, but the more unequal the society the greater the chance of ending up lord of the manor. It’s a brave attempt to define ‘fairness’ from first principles, but everyone from Socrates to Kant has had a different opinion. Even the Judaeo-Christian ‘golden rule’ is no more than a simple version of ‘tit-for-tat’: “I’ll trust you until you betray me, then I won’t trust you again until you’ve proved to me that you’ve changed.” This strategy (or a modified version of it) is the dominant strategy when pitted against less philanthropic – and even downright criminal – versions in computer simulations carried out by sociobiologists, but it still won’t drive out all the rest. The point of the exercise is to show that all of them can happily co-exist, even when the majority of ‘law-abiding’ citizens tries to lock up all the ‘criminals’.

People can’t easily or consciously change their strategies (even if there is such a thing as ‘free will’), and the idea that something is ‘not fair’ is a familiar rallying call, even if ‘fairness’ collapses into what sounds more like tribal loyalty. In an exit poll for a recent British election, the main reason Labour supporters gave for not voting Conservative was that it was ‘the party of the rich’, but, in the words of Mandy (Rice-Davies, not Lord Rumba of Rio), they would say that, wouldn’t they? Given a choice of voting for wealth creation or redistribution, the have-nots will always choose the latter as they have more to gain. It’s an unwritten law of economics that the many will always be poorer than the few. It’s an unwritten law of democracy that the few will always get screwed by the many!

Take the BBC licence fee as an example. When it was first introduced, the justification was that it wouldn’t be ‘fair’ for people to tune in to the BBC without paying something for the privilege, and the technology didn’t exist to prevent them. The unfortunate side-effect, though, is that anybody who doesn’t watch (or listen to) the BBC still has to pay for it. How can that be fair?! Well, in the game of high-stakes poker we call economics, a cross-subsidy always beats a free rider. Now that’s freakish…

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