Ray Bradbury said, ""

Charity v. Welfare IV

Previous posts: I, II, III

As I showed previously, the decision-making process of government welfare is qualitatively different than that of charity. I showed how the role of coercion and harm in government welfare introduces by its very existence civil strife. I will now illustrate the methods of government welfare as compared to charity.

Economic calculation is only possible within the orbit of voluntary cooperation in a market economy ordered on private property rights. The scale of valuations of a lone individual can be expressed only by ordinal notation: one desires X by some degree more than Y, and Z by some degree more than both. These different values may only be arranged in ordinal notation, admitting of no precise reckoning and weighing. With money, the ordinal reckoning of crude inequalities yields to the cardinal notation of prices. It becomes possible to state that one desires a certain means twice, or four and a half, times as much as another means, rather than simply "more than." The existence of money admits of a more precise weighing of wants and needs against the costs of the means to satisfy them. Prices express the scale of valuations of each individual within a market economy. They coordinate the scale of values of buyers with sellers, with a degree not possible outside the sphere of a market economy. They convey the information of each individual's unique and immeasurable scale of wants, in a form free of the myriad elements which went into consideration. Their condensation of the knowledge which went into a decision, allows for a diffusion of a body of knowledge greater than can enter into the considerations of any one or a few individuals.

All action is directed toward the removal of some uneasiness. From an ascetic who seeks to remove the uneasiness of material wants, to a playboy who seeks to remove the uneasiness of a period of celibacy, all human action aims toward a less imperfect state of satisfaction. Humans aim toward ends, and are faced with a variety of means to attain those ends. Some of those means will be commensurate with those ends, and others will be incommensurate. Some means will result in a situation which from the point of view of the individual is more satisfying, others will have no impact, and others will result in a situation which from the point of view of the individual is less desirable. The selection of a means commensurate to an end, resulting in less uneasiness, is profit. The selection of a means incommensurate with the end, is loss. These categories exist prior to the introduction of money. A man experiences a psychic profit, a feeling of satisfaction which does not admit of anything other than the statement that he is by some degree more satisfied after the action than before the action. A man experiences a psychic loss, a feeling of dissatisfaction which does not admit of anything other than the statement that he is by some degree less satisfied after the action than before the action. Within a market economy ordered on private property, profit and loss admit of monetary calculation. It becomes possible to weigh more precisely the commensurability of means and ends. The precision enabled by monetary profit and loss calculations allows a greater ability to apportion means to ends.

Observe Robinson Crusoe. He cannot entertain economic calculation beyond crude inequalities: he desires the meat of a pig by some degree more than that of a chicken, the time spent building a hut by some degree more than that spent constructing a boat, etc. He can if desired arrange his wants in a Maslow hierarchy, but cannot determine their precise relations with each other. Within the sphere of his will, he is incapable of achieving greater precision in weighing his scale of values than inequalities. Upon the introduction of Friday and the formation of a market economy, the voluntary cooperation of both wills and scales of values yields economic calculation. Crusoe can now state that he values a pig three and a half, or five times, as much as a chicken. Prices come about only by the existence of two or more wills acting within the frame-work of a market economy ordered on private property. If Crusoe were to exert complete domination over Friday by constant threats and coercion, the only scale of values expressed will be that of Crusoe: Friday will have become a tool, an instrument of Crusoe's will. The only actor will be Crusoe; he will again be faced with the inability to perform economic calculation. To the degree that Crusoe coerces Friday and replaces his will and scale of values with his own, the pricing process will deteriorate until, with complete subjugation of Friday, Crusoe returns to the same state of inadequate calculation which prevailed when he was solitary. Coercion, in replacing the will and scale of values of an individual with that of another, reduces the ability to perform economic calculation. It reduces the interaction of wills and the pool of knowledge available for action.

To the degree coercion is present, decisions are made on progressively cruder comparisons of alternative means. With full coercion, the complete domination of one individual by another, the market economy breaks down into socialism, in which the pool of knowledge is reduced to one or a few individuals whose will replaces all of society. Without the condensed information conveyed by prices, the coercive will is incapable of gathering and comprehending the enormous amount of knowledge necessary to coordinate anything beyond the division of labor necessary for human life beyond the most savage level of existence. A society beyond the crudest level of sophistication could not exist under the absolute domination of a single will, if at all. When coercion coexists with a market economy otherwise characterized by voluntary cooperation, bureaucracy exists. Bureaucracy is the attempt by a coercive entity to undertake means commensurate with ends by partially substituting the price system with decrees. It relies upon a mixture of monetary calculation and the ordinal reckoning of a single will exerted through decree.

The bureaucratic decree is often an attempt to evaluate that which admits of no monetary expression. By what means is "education" to be weighed against its costs? How does one weigh the costs of running a police station against the benefit of security it provides? In both cases, the costs can be ascertained through prices, yet the benefit remains an elusive quantity which does not admit of monetary expression. How does one measure literacy against the cost of a textbook or an additional teacher's employment? The capture of 200 more criminals per year against the cost of new forensic equipment? Security versus privacy? Such decisions cannot be decided on the basis of weighing costs in monetary terms against benefits in monetary terms. It is dependant on one will, whether a town manager or council or popular vote, to express an ordinal reckoning through decree over competing wills. In all such cases, this ordinal reckoning introduces some non-monetary factor into its decision-making.

When individuals weigh their scales of values according to the myriad factors which enter into their considerations, from aesthetic appreciation to religious doctrines to monetary-profit seeking, the weight attached to a value is condensed in the act of exchange into a price. This price conveys information about the scales of valuations of both buyer and seller, and is dependant on their mutual calculations and pool of knowledge. When a coercive entity weighs its own scale of values according to its own myriad factors, the weight attached to the value is condensed in the act of enforcing a decree. The decree conveys information only about the will of the coercive entity. Whereas all prices convey information about all parties involved, and are the expression of a mutual decision based on different scales of values, a decree conveys only information about the decree-giver's knowledge and scale of values. It is divorced from a mutual apprehension of values through a precise cardinal notation of prices.

Decrees do not admit of monetary profit and loss calculation. The satisfaction of the decree-giver cannot be measured in monetary terms: the increased literacy as a result of the purchase of new textbooks is outside the realm of monetary expression, for example. Decrees cannot achieve the precise weighing of means versus ends available to individuals using monetary calculation of profit and loss. They operate on the same ordinal expression of profit and loss that a solitary individual employs.

A summary so far: All government welfare programs start with the acquisition of wealth through taxation or inflation. The very acquisition of funds by government requires that harm come to some portion of society. The benefit which comes to a specific group as a result of the welfare program is valued more highly than the harm which must necessarily befall another group. This justification of harm annihilates equal rights and isonomy, introducing civil conflict in which each group wars against other groups by proxy of the government. The use of the wealth is determined by a small group of individuals whose will in some area of decision replaces that of the rest of society through decree. This small group of individuals inherently possesses a body of knowledge inadequate to comprehend the mass of knowledge necessary to coordinate the decisions of the rest of society. This small group of individuals is inherently unable to apply monetary profit and loss calculations to its selection of means.  It is literally incapable of making the same decisions private individuals operating within a charitable organization make.

Next: more on the implications of the difference in decision-making in the use of funds for government welfare.

Posted by: Tom "The Pooklekufr" Treloar at June 26, 2005 04:10 EST | Permalink | comments |
politics, economics

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