I remember sitting in Dwight Israelsen’s Econ 1500 class and thinking, “Finally, I can study something that will help me to understand just how the world works!” My concept of the power of economics was based on a desire to understand the drivers of decision-making so well as to be able to manipulate behavior according to what I thought was best.
The real power in economics is in the simple understanding that what is most beneficial to society as a whole is to allow each individual to decide for themselves how they will seek personal happiness. There is a reason that legislation that goes beyond just creating a sphere within which the individual members of society can freely and gainfully interact–does not work. The reason is this: the aggregate of preferences that combine to define market demand are truly as varied as the individuals that they belong to. People do not react to invasive legislation uniformly. They each will continue to seek their chosen level of happiness, and with increasingly creative means due to whatever legislation is changing the rules by which “the game” is played. And yet, each new piece of legislation passed assumes the same inane thing: due to the brilliant way this legislation is crafted, everyone is going to act just as we are expecting them to. Unfortunately for this kind of thinking, each person will adjust their choices according to the changed landscape of costs and benefits.
The quote that stuck me most powerfully ties the aforementioned faulty assumption to the reason that it still underlies much of the “frightful moral disorder” being created in our current system. “On a false path there is always inconsistency; if this were not so, mankind would be destroyed. We have never seen and never shall see a false principle carried out completely. I have said elsewhere: Absurdity is the limit of inconsistency. I should like to add: It is also its proof.” (p. 33)
Have you ever started to eat really spicy corn chips and realized that they are burning your mouth, but that the burn only really kicks in once you stop eating? So you do the only rational thing and keep eating to keep the burn at a bearable level. Unfortunately this leads to an inordinately large amount of chips consumed (which has all kinds of effects which are unforeseen, but only the first time this happens.) Legislation is the same way! Once we get a “few bites” into the legislation we realize how quickly the seen consequences wear off and as we start to feel the “burn” of the unforeseen consequences. We then come up with more legislation which only temporarily assuages the sting of the unforeseen consequences of the former legislation by garnering more short-term effects. It becomes a vicious feedback loop which never is “completed.”