Winners and Losers

Steven Landsburg has a provocative post. His point seems to be that those who focus on the “losers” from free trade “want us to conclude either that free trade is not a good thing, or that at the very least, the winners should compensate the losers.”

Landsburg continues:

This strikes me as an extraordinarily dishonest way of arguing, because pretty much nobody ever argues this way about anything else, even though every policy change in history has created both winners and losers. In fact, every human action has both winners and losers. When Archie takes Betty instead of Veronica to the ice cream shoppe instead of the movies, both Veronica and the theater owner lose out. It does not follow that all human actions are wrong, or immoral, or should be discouraged by law, and it does not follow that all human actions should be followed by compensation to the losers.

What I object to — aside from Landsburg’s habitual use of “us,” which suggests some kind of collective consciousness at work — is his unfortunate, if inadvertent, endorsement of the idea that every human action has both winners and losers. “Winner” and “loser” are terms that properly apply to persons who are engaged in some kind of contest or bet. The rest — which includes just about everything — is just life. Stuff happens: Veronica doesn’t go the movies with Archie; American steelworkers lose jobs; dinosaurs become extinct.

Except when government is involved. Government action changes the natural course of human events, the course that they would take in a society that is bound by shared beliefs, language, and customs (or norms). A government of a relatively small or close-knit geopolitcal entity may act in accordance with and reinforce societal norms, but the governance of the United States has long since become something else: a set of interlocking dictatorial regimes (federal, State, and local) bent on enforcing rules designed on high, sometimes with the intention of favoring specific groups. Those specific groups have something that the ruling caste wants: money, influence, and votes.

Government acts legitimately only when it does things that would be done by a cohesive social group. Self-defense is one of those things. When government wages war in defense of its citizens, it has a claim to legitimacy — though the soundness of the claim depends on the necessity of the war and the skill and efficiency with which it is waged. When government executes murderers it legitimately exacts justice and deters more murders — though the soundness of the claim depends on the swiftness and fairness with which executions occur. A foreign enemy isn’t a loser, he’s an enemy. An executed murderer isn’t a loser, he’s a recipient of justice.

But beyond defense, justice, and the even-handed representation of Americans’ interests in foreign capitals, there is nothing that government can claim as a legitimate function. Government’s forays into welfare, for example, are destructive of private charity and go far beyond what a well-functioning social group would allow, in that they discourage work and saving. Social Security and Medicare, for example, don’t just mimic private charity toward the poorest and sickest of the elderly population, they benefit even the the wealthiest and healthiest of Americans. Social Security benefits and the market value of Medicare (as insurance) can easily raise a retired couple’s effective income from, say, $250,000 to $300,000 or $325,000. That’s not charity, it’s middle-class and upper-middle-class welfare. (I don’t mean to suggest that the wealthiest should be forced to subsidize everyone else; that’s a socially and economically destructive idea that I’ll not bother to discuss here.)

There’s much more to government than spending, of course, There’s also the vast web of regulations that has been spun by government at all levels. Regulations alter the course of social and economic intercourse, as they are meant to do. The justification is usually either “for your own good” or “for the good of group X.” In any event, social norms and incentives to work and save are subverted by those who believe, wrongly, that they can subvert those norms and incentives without inviting unintended consequences. The Great Recession, for example, was caused by regulation, not deregulation.

It has come to pass that many of government’s fiscal and regulatory interventions are rationalized as efforts to “level the playing” field and compensate “losers” for the “unfair” advantages enjoyed by “winners.” But such language masks a presumption that there are better social and economic arrangements and better outcomes — which, of course, are known to those who use such language. This is called the nirvana fallacy, the invalid comparison of imperfect reality to imagined perfection.

It therefore surprises me that Steven Landsburg, who is super-rational and a stickler for accuracy, would invoke “winners” and “losers.” To do so lends aid and comfort to the proponents of social and economic engineering.

It might be said, with some justice, that government interventions create winners and losers. But what those interventions really create are dependents and victims. The dependents are the tens of millions of Americans who rely on government welfare and government grants of privilege (e.g., affirmative action, regulatory protection from competition, subsidized loans). The victims are the tens of millions of Americans who pay directly for such privileges (e.g., high marginal tax rates, regulatory infringements on liberty, suppression of free speech and association, theft of property rights), and the 300-million-plus whose income is far less than it would be in the absence of fiscal and regulatory interventions, which are damaging to economic growth.

A person who earns an honest living as an investment banker, baseball player, or movie star and makes millions of dollars a year isn’t a winner, in the proper sense of the word, he’s just being rewarded according to the value placed on his efforts by those who pay for them. A person who earns a pittance because he’s an illegal immigrant who can’t speak English and has no particular skills isn’t a loser, he’s just being rewarded according to the value placed on his efforts by those who pay for them. Veronica isn’t a loser because Archie prefers Betty, she’s just another beautiful girl who can probably land someone better looking and richer than Archie. The theater owner isn’t a loser because Archie doesn’t take Veronica to the movies, he’s just another businessman who’s in the wrong business if the loss of two customers for one night is a big deal.

Let’s get real and quit calling people winners and losers when they’re not playing games or making bets. Let’s get real and start talking about those who are dependent on government and those who are its victims, which is just about everyone but the politicians and bureaucrats who feast at the public trough.

And, yes, I do mean to say that most of the dependents and enablers of big government are its victims. Such are the wages of social dissolution and economic ignorance.