Tax-Subsidized Recreation Brings Conflict

The following article originally appeared in Grand Junction's Free Press.

April 28, 2008

Fruita rec center another zero-sum game

by Linn and Ari Armstrong

In our last article, we discussed Barack Obama's confusion about zero-sum games, situations in which one person's gain comes at another's loss. Michelle Obama perfectly summarizes the zero-sum mentality (as reported by Neal Boortz[via Myrhaf):

"The truth is, in order to get things like universal health care and a revamped education system, then someone is going to have to give up a piece of their pie so that someone else can have more."

We don't think that people's pies, or their pay checks, belong to national politicians. Or to local politicians, for that matter.

A defining characteristic of a free market is that people are able to make mutually-beneficial transactions. One person's gain is the other person's gain.

A fun place to view the workings of the free market is Down Town Grand Junction during Farmers Market. But even here the invisible hand that Adam Smith talked about can go unnoticed. We do not see the thousands of exchanges of goods and services that came before a single apple could be sold at the Farmers Market. Breeding, planting, irrigation, fertilizer, tractors, haulers -- the list goes on and on -- made possible the apples we buy at market.

The free market system is beautiful to see, so why would anyone want to upset the apple cart?

Farmer John's apple cart competes with other apple carts and also, to an extent, with many other businesses. If we buy apples, we have less money to spend elsewhere. Yet if Farmer John offers quality apples at a good price, he'll make sales.

Now imagine that, one day, Farmer John notices a new apple cart across the street, one run by the government. The latest freeze was less frightening. These apples are subsidized by taxpayers, whether they eat the apples or not. Because the government forces people to subsidize its apples, Farmer John suddenly faces lost sales and, perhaps, bankruptcy.

Moreover, because people lose more money to taxation, they have less to spend with the lemonade stand, the dance teacher, and so on, who in turn have less money to spend for goods and services that they want.

The government's apples are seen, as Henry Hazlitt would say, whereas all the goods that are not produced, and all the services that are not offered, are unseen.

Subsidized apples are an example of a zero-sum game. Some people's gain -- the employees and customers of the government's subsidized apple cart -- imposes a loss on others -- Farmer John and everyone else who loses business.

True, there are winners and losers in a free market, but the difference is that, in a free market, exchanges are voluntary, so the losers are those who fail to satisfy their customers; the system remains one of positive gains. In zero-sum politics, the resources of some are forcibly transfered to others, creating a net loss.

Substitute a recreation center for an apple cart and we arrive in Fruita, notably a town that did not get its name from government-run fruit production.

Recently the people of Fruita voted on a measure to use tax dollars to build a city-owned recreation center. The measure failed on a tie vote.

This issue has divided the community of Fruita, and this is not surprising. Half of the community is willing to use governmental force, ultimately at the point of a gun, on their neighbors to build the center. (If our claim strikes you as overly dramatic, try writing a letter explaining that you choose not to pay your taxes, and see what happens to you.)

Is a recreation center a good idea for Fruita? We don't know. If it is, then it will be profitable on a free market. Those who want the center can raise the capital, build the facility, offer the services, and pay for it all by charging their customers (or collecting voluntary donations). Just like any other business.

But if the recreation center cannot be built without government force, it shouldn't be built at all. The government has no more business offering recreational services than it does selling fruit. The government should not subsidize some people's pet recreational activities at the expense of movie theaters, dance instructors, ski slopes, Boy and Girl Scouts, restaurants, 4H, tour guides, outdoors stores, rafting companies, and so on.

Even a small tax can have large effects when spread out over a city's population. Moreover, a government that can forcibly transfer a little wealth can forcibly transfer a lot of wealth. A few dollars here, a few dollars there, and suddenly the total tax burden approaches half our income. Families that would rather spend their money on an ice cream cone or put it toward the college fund, rather than toward a recreation center, have that right.

Zero-sum politics diminishes neighborly trust because it harms some to benefit others. The alternative is the positive-sum, voluntary free market.

Presidential Candidates Play Zero-Sum Games

The following article originally was published by Grand Junction's Free Press on April 14, 2008.

Presidential candidates play zero-sum games

by Linn and Ari Armstrong

When you walk into any store and trade your money for a product, often both you and the clerk will say, "Thank you." The reason for this is that, in a voluntary exchange, both parties benefit. The same is true at your job. Employers value the labor of employees and pay for it, while employees value the paycheck and other benefits enough to do the work.

In a free-market system that bars fraud, stops the initiation of force, and protects people's property rights, one person's gain is another person's gain. And when people can count on the legal protection of their property, they invest in new skills, machines, factories, technologies, and other capital. Over time, this raises people's productivity and real wages, leading to a growing economy.

A thief rejects mutually-beneficial exchange. If a hold-up man takes $100 from you by force, then the thief is better off financially for the moment, but you are worse off by the same amount. Such a situation is sometimes called a "zero-sum game." Some people gain at the expense of others.

When a society becomes plagued by zero-sum interactions, the result is economic destruction. To the extent that people fear that the fruits of their labor will be taken from them by force, they stop producing, trading, and investing. For example, look at much of Africa.

Unfortunately, while the United States was founded on the ideals of liberty, government limited to the protection of rights, and secure property, today's presidential candidates actively promote the zero-sum games of political controls.

In his famous speech on race, Barack Obama worried that, for many working people, "opportunity comes to be seen as a zero sum game, in which your dreams come at my expense." He added, "the path to a more perfect union... requires all Americans to realize that your dreams do not have to come at the expense of my dreams; that investing in the health, welfare, and education of black and brown and white children will ultimately help all of America prosper."

But by "investing" Obama does not mean that individuals should be free to invest in their children's education or a company, or even to donate voluntarily to charity. Americans don't need Obama to tell them that getting an education, contracting for quality health care, and saving for the future are good ideas.

No, what Obama means by "investing" is that he wants to take more of your money by force and give it to others, of course with a huge chunk taken out to pay the salaries of bureaucrats.

For example, Obama wants to socialize medicine. That means that you will have to pay through the nose in taxes in order to wait in line to get "free" health care that sucks. (For some of the problems that other countries are experiencing with health care, see Michael Tanner's recent Cato paper, "The Grass is Not Always Greener.")

Forced welfare, as opposed to voluntary charity, tends to promote dependency and irresponsible behaviors. And tax-funded "investment" in jobs means siphoning money out of the productive economy to reward special interests.

In other words, most of Obama's policies promote zero-sum games, in which some gain at the expense of others.

But it's not like John McCain is much better. Last November, Matt Welch wrote for the Los Angeles Times, "McCain... wants to restore your faith in the U.S. government by any means necessary, even if that requires thousands of more military deaths, national service for civilians and federal micromanaging of innumerable private transactions. He'll kick down the doors of boardroom and bedroom, mixing Democrats' nanny-state regulations with the GOP's red-meat paternalism in a dangerous brew of government activism."

To pick out one of those examples, forcing people to "serve" others (a practice we thought was outlawed in the United States) fails to recognize the benefits of liberty and mutually-beneficial exchanges. In a free society, people are free to give of their time and money to others. But the choice is left to them, and people are not free to forcibly give away the time or money that belongs to somebody else.

McCain asks you to "sacrifice your life" to "a cause greater than yourself." In general, we're opposed to human sacrifices, but especially when a political leader defines how and for what you are to sacrifice yourself. Didn't we already do the century in which political leaders asked their countrymen to sacrifice their lives to the state?

Given McCain's guiding principle of sacrifice, we expect him to be a fair-weather friend -- at best -- to voluntary, mutually-beneficial, free-market exchanges, despite his occasionally market-friendly rhetoric.

We don't know who will become the next president. But we fear that whoever wins will do his or her damnedest to make sure that the rest of us lose.