Message to the Nation|
and to Human Society
We need one another.
We also need one another to make possible the benefits of civilization.
We have yet to master very well the art of mutual advantage and win/win
(and win/win/win with reference to the general good!), and to minimize the
costs of constraints engendered by our increasing numbers.
We must somehow gain far more from one another with each increase in numbers than we lose by mutual constraint, by mutual restraint, and by scarcities. To the extent we fail to address many of our common needs, we tend to force matters and, in order to do this, amass stakes of power and government.
People contending for those stakes aren't always very nice people, and even those who are, might not be as well behaved as they would be when not contending for or defending their stakes.
The free market is the ideal self-governance model in most products
and services and endeavors but in many of these, the guiding hand of the pricing mechanism is knocked askew of the common good by:
Rather than arranging countervailing incentives which would allow individual initiative and free market mechanisms to provide efficiently over a wider range of conditions, we've instead and historically attempted to address those problem areas and, indeed, most of our common goals by more direct means of governance.
- distortions in the available information
Amassing those stakes of power, we tax for the means to spend on
these matters, with little or no regard as to how the incidence of tax affects behavior. People go to great lengths, indeed spectacular lengths, to find loopholes and tax breaks. What we've failed to do is to arrange the loopholes and tax breaks in the right places.
where the benefits of some service, especially some public service, cannot readily be divided and their costs assigned directly to the beneficiaries. Examples include national defense (how much of that benefit and charge can be assigned to St. Louis, say, and how much to Denver?), and certain aspects of public health, such as stopping epidemics or extinguishing smallpox.
where both external economies or economic benefits, and external diseconomies or costs, are felt by others than those who provide or inflict them. Example of an external diseconomy is downwind or downstream pollution. Example of an external economy or benefit is to shovel the snow off the sidewalk in front of your house or shop. Or the instance of basic research, where a $5 million investment by your firm might or might not produce a $5-10 million benefit to you, but bring many billions of dollars to the rest of the economy.
Distortions of information
Diseconomies get routinely inflicted upon the rest of us unless restrained or unless counter-incentivized, because their providers feel only a small part of the costs of their activities but all or most of the benefits. Unless required or unless counter-incentivized, goods and services involving external economies get under-provided because the providers would bear all of the costs but get few of the benefits.
Historically, we've almost always attempted to "correct" imbalances in these areas by direct government provision, or ignored them and pretended that they don't exist, and both of these recourses are very expensive. Using countervailing incentives to let natural market mechanisms operate over these areas would be far more efficient, and greatly reduce not only the tax burden but the concentrated stakes now represented by government.
not only "spin" as applied routinely
today, but can anyone really deny the power of advertising, and the unequal access to full information, which prevail today more than ever? This cuts far beyond matters economic; it cuts to the essential foundations of western democracy itself. Jeremy Bentham's fundamental assumption, which underlay all subsequent cases argued on behalf of any and all western democracies including most notably the USA, was that members of a well-informed public knew better than did far-off rulers what would be in their own best interests, so that the public's say in most matters would result in a greater common good. Alas, alas, alas!
Win Wenger, Ph.D.
Incentives as a preferred instrument of
corporate and public policy.