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Wednesday, February 22, 2012

The Best Bet Is Freedom

As I was watching a recent GOP debate in Las Vegas, I couldn’t help but think of the millions of people who enter the casinos expecting to beat the odds. Some do. Most do not. There is a reason gambling is a multibillion-dollar industry. Big profits are made as relatively small amounts are lost by the masses trying to beat the system. Of course gambling may be regarded as entertainment, but the relevant feature of gambling for present purposes is that it is a zero-sum game. One person’s winnings are necessarily another’s losses. Wealth is transferred, and the house always wins so long as enough people play the game.

Similarly, politics operates as a zero-sum game. Economist Robert Murphy points out that our current political system is actually a negative-sum game, but even if we could eliminate all bureaucratic waste, we cannot escape the simple truth that when an individual wins political favor, he or she only benefits at the less obvious expense of someone else. There is no such thing as a magical public fund from which political gifts spontaneously generate. No matter how noble the intention or the cause, the benevolent politician is not Santa Claus. All goods distributed by government must first be created or produced by somebody. Whatever is given must first be taken. This is true for corporate subsidies and bank bailouts, just as it is true for transfer payments made to the very poorest members of society.

People by and large accept such a system because they believe they will be able to draw more in political advantage than they lose by way of political plunder. This mentality keeps the population playing the game, and like the casino, if enough people play the game, it is the political class and the politically connected who always win.

The government spends more, regulates more, and interferes more in our lives each year—and the economy barely grows. Even with the odds stacked against the average person, people still seem eager to place their bets on the system by looking for political solutions. In Vegas they would call this a “sucker bet.”

To better the odds of reaping political spoils, individuals with shared interests tend to join together to increase political influence. Teachers, lawyers, labor unions, banks, farmers, defense contractors, the elderly, and myriad other identifiable individuals band together in groups to maximize potential benefits for their special interests. What seems to go unnoticed is that the government itself is one of the largest special interest groups of all, now comprising 15 to 17 percent of the total workforce. As Ludwig von Mises observed, “Seen from the point of view of the particular group interests of the bureaucrats, every measure that makes the government’s payroll swell is progress.”

The goal of politicians is to create the appearance of providing free goodies to the public. Lack of knowledge about the true costs of these goodies may be one explanation for mass participation in a system of gross exploitation. While the gambler’s winnings and losses are visible, it is more difficult to identify the true costs of the political game. Even under the most transparent federal budget, the costs of political programs are dispersed across the population in amounts indiscernible to any single person. It is virtually impossible to calculate net political profit or loss for any individual or group in the tangled web of taxes, subsidies, patents, regulations, transfer payments, services, and prohibitions.

Moreover, when resources are consumed by any government program, there is the unseen cost of what never comes to be. For example, when lobbyists persuade politicians to spend millions every year to maintain a vacant desalination plant in Yuma, Arizona, that money is no longer available to be invested in the creation of products consumers want and jobs people need. When resources are diverted into subsidizing jobs in a failing industry, new jobs in a sustainable industry are never created. This is the unseen cost of politics.

Not only are the odds of winning better at the casino, but gambling is far more ethical than actively seeking political loot. While both politics and poker are zero-sum games, the gambler bears the full risk of the bet. Through the political process people are able to profit only when the costs and the risks are spread to others.

Furthermore, all wagers made in the casino are voluntary. It is difficult to make the case that you or I voluntarily consent to having our money taken for Wall Street bailouts or even unemployment benefits. It is even harder to make the case that children not yet born offer their consent to the debt burdens we incur today.

Some people may argue that shared sacrifice is simply part of an implicit social contract. I find it less than convincing that a mad grab for the property of others is fundamental to civilization. Humans come together in society because of the benefits reaped from the cooperative actions of knowledge sharing and the division of labor. The degree to which societies have prospered is directly related to the degree to which individual property rights are respected.

Fortunately, there is a proven system where wealth is not merely transferred in a win-loss fashion. In the free market wealth would be created and exchanged for mutual benefit. It would not be a zero-sum game. The free market entails voluntary exchange and thus is also the only moral arrangement because it is the only system that does not necessitate violence, theft, or exploitation. Some argue that the free-market process would be cold and compassionless, but as Penn Jillette explains:

It’s amazing to me how many people think that voting to have the government give poor people money is compassion. Helping poor and suffering people is compassion. Voting for our government to use guns to give money to help poor and suffering people is immoral self-righteous bullying laziness.

The greatest threat to the established political order is for people to fully realize that whenever the force of government is used to obtain special privilege, it is done at the expense of our neighbors, friends, and family. All that would be required to end political plunder would be to cease asking politicians to do for us what we would never ourselves do to our friends. The system of voluntary exchange offered by the free market does not claim to offer utopia or immediate gratification of all of society’s wants, but it is the only sure bet for incremental progress toward human flourishing.

This article first appeared at

  • Jason Riddle was the Vice President of Programs and Strategic Operations at FEE. Prior to joining FEE, Jason spent over eight years as a management consultant working with a variety of public and private organizations to enhance their business performance through improved risk management, operational effectiveness, and control around internal and external reporting.