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The stupidity of crowds

October 14, 2010

Jamie Whyte in The Philosopher’s Magazine:

Here is a topical example of the wonky logic that pollutes public debate. The new government of the United Kingdom is trying to reduce its deficit by increasing taxation and cutting government spending. In doing so it claims to be guided by affordability and fairness. That is, it will cut government spending on those things that cannot be afforded and it will ensure that the resulting fiscal arrangements are fair. This sounds reasonable, but only if you do not pause to think about how affordability and fairness could possibly guide a government’s decisions on taxation and spending.

Start with affordability. The problem is that, provided the cost of something does not exceed your available funds (which include your cash savings, your sellable assets, your current income and your borrowing capacity), it is affordable. Most adults can afford a Ferrari. If they sold their home or diverted a large portion of their income to a car leasing agreement, they could have one. The reason they do not do this is because they prefer to spend their money on other things: for example, most would prefer having a home and a Toyota to having a Ferrari and no home. No sane person makes their spending decisions on the basis of affordability.

The same goes for government spending. Each individual item of government spending is less than the government’s total (tax) income and borrowing capacity. [More]

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