Wednesday, November 2, 2011

Freeloading, Welfare and the Rich

For any human society--for any social animal--the big issue is freeloading.  The biggest threat to social solidarity is free-ridership.

At one level, we are all free riders.  We all benefit from society way beyond our contribution.  Even a chap like the late Steve Jobs could not bring forth his consumer-electronic trinkets without the rest of society.   After all, what did he know about solid-state physics, computer processor design, software design, touch display technology?  The brilliance of Steve Jobs was his ability to put things together: as in entrepreneur.

Despite the huge benefit each of us obtains from our membership in  society, we humans are quick to accuse the other chap of freeloading.  Lefties accuse the rich of "exploiting" the poor.  Union members accuse the bosses of screwing the working man.  Righties tell the poor to "get a job."  And President Obama wants the rich to "pay their fair share."

Obviously, we all care deeply about free riding.  The question is: what do we do about it?  Here, as usual, we turn to Michael Novak and his Gaulian division of society into three parts: political, economic, and moral-cultural.

We can attack the free-rider problem politically, by using force.  If we want to do that then we assign the politicians to do the job.  Government is force, and politics is power.  Politicians will gladly go after the rich and make them pay more taxes.  But the problem with that is that the politicians will also listen to the would-be crony capitalist that comes bearing political contributions.  And the politicians aren't all that smart.  They will find, in a crisis, that all kinds of institutions are "too big to fail" and that in the present emergency they must free ride on the rest of society.  You could also ask the politicians to tell the poor "to get a job."  We did that back in the 1990s when President Clinton signed the welfare reform bill that reformed one of the 79 federal welfare programs.  But many people disapprove.  They call welfare reform "balancing the budget on the backs of the poor."

If you don't like force, there is an alternative.  You can shame the freeloaders.  According to Nicholas Wade in The Faith Instinct, this is what religion is all about.  Policing freeloaders is a costly business, and you make people mad because nobody likes being bullied around and told to pay more taxes or get a job.  So you discover that, in addition to the usual earthly policemen there is a divine police force that is willing to catch the freeloaders and make them pay.  Even if the freeloader gets away with it throughout his earthly life, the gods will make him pay in the next life.  It's a cunning system, but it requires a proper socialization in childhood to inculcate the idea of divine justice.

Another way to deal with free riding is to let the economic sector worry about it.  The economic sector works like this.  If you think that Joe over there is a free rider, you don't deal with him.  You don't hire him.  You don't work for him.  You don't buy from him.  There is a certain elegance in this approach.  It doesn't require force.  It doesn't require a government program.  It doesn't even require public shaming.  It's just a private thing.  You say to yourself: "I don't like the cut of that fellow's jib."  And that is that.

Let us do a bit of reckless simplifying and tell a story of freeloading down the ages.  In the hunter-gatherer age, the dominant response to freeloading was religion.  It was appropriate because force was expensive and created blood feuds, and because communities were small enough that an individual couldn't really decide that another individual was a bad apple and refuse to deal with him.

In the agricultural age there was an increase in the use of force, because the political elite was rich enough to afford an army.  But still, the idea of divine justice was very strong.

In our age we have reduced sharply the use of divine justice to curb freeloading.  In response the political sector has stepped up its enforcement against freeloading.  Unfortunately, as we saw above, there is a lot of disagreement about who the freeloaders are. It isn't me, it isn't thee; it's probably that guy behind the tree.  The modern age has also seen a big increase in the regulation of freeloading by the economic sector.  Arguments over freeloading create division in society.  So modern man has expanded the economic approach to freeloading.

The loosening of social ties and the breakdown of the local extended family in the modern age means that you can choose who you will deal with.  You can even refuse to deal with a family member, and it isn't the end of the world.  Control of freeloading by refusal to deal works.  People who try to cheat other people are likely to suffer a reduction in income, and therefore pay a penalty for their freeloading.

Many people have tried to revive the divine justice approach to freeloading, especially our environmental friends.  They urge us to "save the planet" by recycling and by reducing our carbon footprints.

When you look at freeloading this way, one thing comes out very strongly.  We have a wonderful solution to the freeloading problem in our market system economy, but nobody gives it any credit.  Attack freeloading with government force, and you create division in society because everyone disagrees about who the real culprits are.  Attack freeloading with religion, and you must face the problem that in recent centuries the belief in divine justice has declined.  Even among believers there is more belief in a loving, forgiving God than a stern divine patriarch.

The obvious choice is to let the people be the judge of freeloading in their own lives.  If they make a mistake, and refuse to deal with a guy who really does contribute to society they are only hurting themselves.

But that would be too easy, and not as much fun as a public humiliation of the evil doers.

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