The Arrogance of (Some) Economists

Paul Krugman, former economist, writes:

Think of the government budget as involving tradeoffs similar to those an individual household makes. On one side, there are all kinds of things the government could be doing, from dropping freedom bombs to providing children with dental care; think of each of these things as involving a certain marginal benefit per additional dollar spent, with the marginal benefit declining in the total amount spent on each concern. On the other side, raising revenue has a cost, both the direct cost of the money taken from taxpayers and the possible reduction in incentives from higher tax rates.

What the government should do, in this case, is set all the marginals equal: the marginal benefit of an additional dollar spent on bombs, dental work, national parks, soup kitchens, etc, should all be equal, and this common marginal benefit should equal the marginal cost of raising an additional dollar of revenue.

Krugman must know that the benefits of government programs are unlikely to flow to the persons who bear the costs of those programs. Even if the benefits were to be allocated in such a manner, it would be pure arrogance to assume that income-allocation decisions should be taken from individuals and placed in the hands of government official and bureaucrats. That, of course, is precisely the assumption that underlies government spending. And those who share that assumption, are guilty of the same arrogance. Krugman is so guilty that he should be serving time in a special hell of his own — being forced to listen to the recorded lectures of Milton Friedman, for example.

What is the problem with the kind of cost-benefit analysis prescribed by Krugman? It is this: If you take a dollar from me to make X happier, you have made me less happy, and X’s greater happiness doesn’t compensate for my greater unhappiness. I don’t even have to be a selfish curmudgeon to object to the transfer of my dollar to X. It could be that I wanted to give the dollar to one of my grandchildren, which would have made both me and my grandchild happy. As for X, I couldn’t care less. And it is presumptuous of Krugman (or anyone else) to suggest (even by implication) that it is okay to take a dollar from me just to make X (or a government bureaucrat) happier.

Government, in short, is a tool used by arrogant, self-serving individuals to impose their preferences on others. That is why government should be restricted to a night-watchman role — protecting citizens from predators, foreign and domestic. Anything more than that is social engineering.

Politics and Prosperity

“Government is a disease masquerading as its own cure.”

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