Since I am an economist and my school year is not too far along, my classroom discussion of how all of economics traces back to the fact of scarcity (the Continue Reading
Since I am an economist and my school year is not too far along, my classroom discussion of how all of economics traces back to the fact of scarcity (the combination of limited resources, which implies a limited ability to produce, along with wants that always exceed the amount that can be produced) facing everyone was quite recent. That was why Brad Polumbo’s recent article, “What AOC and Nina Turner Get Wrong about the ‘Scarcity Mindset,’” so quickly drew my attention.
It is the fact that each of us on earth faces scarcity that drives economics as a field (and why I tell my students it will only help them on earth, and not in heaven, since we are told there will be no scarcity there). Scarcity implies that we must choose among the goods and services which we want, since we want more than we can have. Further, making choices means we must bear costs, because choosing one thing we want is also choosing not to have something else we also want (which economists are famous for calling opportunity costs, to remind ourselves that costs are always the highest valued opportunities foregone by decision-makers).
We then add the assumption of self-interest (not the same as selfishness, but simply that there are some things or purposes we would like to advance), that leads us to what I call “the rule of rational choice:” Whatever choice or action someone is being considered, individuals choose to “do it” if and only if the marginal expected benefits to the decision-maker exceeds the marginal expected costs to the decision-maker. Everything in economics connects to this rule.
So when Polumbo quoted AOC as tweeting, “We can do good things and reject the scarcity mindset that says doing something good for someone else comes at the cost of something for ourselves,” and that Nina Turner wrote, “We must reject the scarcity mindset. Our government has the ability to fund programs that will help everyone,” it piqued my curiosity.
As Polumbo explained, their use of the “scarcity mindset” traces back to Steven Covey’s book The 7 Habits of Highly Effective People, which he used to describe a win-lose paradigm, in contrast to the “abundance mindset,” which he used describe a win-win paradigm. Covey wrote, “Most people are deeply scripted in what I call the Scarcity Mentality. They see life as having only so much, as though there were only one pie out there. And if someone were to get a big piece of the pie, it would mean less for everybody else. The Scarcity Mentality is the zero-sum paradigm of life.”
However, Covey’s “scarcity mindset” is very different from the implications of scarcity that economists study. While economics can certainly be used to analyze win-lose situations, it contains no assumption or implication that voluntary arrangements are win-lose. In fact, because all parties to voluntary arrangements must agree to the terms, every participant must expect to gain from them—they are win-win. That is, scarcity—a fact for each of us—does not equate to a “scarcity mindset.”
Consequently, when progressives claim that all that prevents using government as they prescribe from benefitting all of us is the zero-sum “scarcity mindset,” which an “abundance mindset” would solve, they are really saying they could do a lot of good if we would just assume the reality of scarcity away. Unfortunately, adopting the “abundance mindset” does not actually eliminate scarcity. All of scarcity’s implications for economic analysis still hold. The “right” mindset, as progressives see it, does not create the “free lunches” they advertise.
Compounding the confusion, progressives also abuse the idea of an “abundance mindset.” They imply that if we just had the “right” mindset, that would make government interventions positive sum in nature. That is how we could all supposedly benefit from substituting government dictation for our own choices with our own resources in almost unending ways.
Unfortunately for that argument, there are many problems that hamstring the beneficial paternalism progressives advertise from making us all better off. In a nutshell, as economists emphasize, “incentives matter,” and government incentives fall far short of those facing one’s actual parents. Your parents know more about you than government. They care more for you than government (including efforts to build character and develop appropriate independent behavior, rather than expanding dependence). They can more flexibly face changing circumstances than government famous for being a slow, red tape encrusted bureaucratic beast. And they are forced to use their own resources and those voluntarily attracted from others, so they cannot harm others in the process, rather than involuntarily taking them from others, as does government.
So if we know that voluntary arrangements are expected to benefit all whose rights are concerned, because all parties must agree to them, but government arrangements can easily be win-lose (or even win-lose-lose-lose … ) because of their coercive power, how can we tell whether what is involved is win-win, as progressives claim, or win-lose?
Leonard Read, among history’s most devoted defenders of liberty, offered us a useful approach to this issue in “Saying What You Really Mean,” in his 1967 book, Deeper Than You Think:
Simply ask whether arrangements involve willing or unwilling exchange.
Shall it be willing or unwilling exchange?
Standing for willing exchange, on the one hand, or for unwilling exchange, on the other, more nearly accents our ideological differences than does the employment of the terms in common usage.
If we cut through all the verbiage used to report and analyze political and economic controversy … much of it boils down to a denial of willing and the insistence upon unwilling exchange.
The list of coercive activities that go beyond the principled scope of government runs into the thousands.
The concept of willing exchange unseats … all forms of authoritarianism—and enthrones the individual…. Individual freedom of choice rules economic affairs.
A good society … [requires] the unobstructed flow of creativities … in free and willing exchange.
No person, or any combination … has any right of control over any other person that does not exist or inhere as a moral right in each individual. The only moral right of control by one individual over another or others is a defensive right, that is, the right to fend off aggressive or destructive actions. Governments, therefore, should go no further in controlling people than the individuals who organize it have a moral right to go…. In short, limit governmental power to codifying the do-nots consonant with the defense of life and livelihood, to the protection of all citizens equally. No special privilege for anyone!
This is to say that, ideally, government should be limited to inhibiting and penalizing all violence, fraud, predation, misrepresentation—that is, to keeping the peace. Insist that it tolerate no unwilling exchange and that it never indulges in what it is organized to prohibit. Let government do only this; leave all else, including welfare and prosperity, to willing exchange.
Leonard Read’s focus on voluntary exchange backed solely by defensive force can help cut through the tangle of confusion and distortion that misleading progressive use of “scarcity mindsets” and “abundance mindsets” create. It is true, as they insist, that government could conceivably benefit all of us (as it would if it solely acted to better defend all of our rights to “life, liberty and the pursuit of happiness,” allowing more win-win voluntary arrangements). But the only time we can be sure that government does that is when all exchanges are, in fact, voluntary.
Yet if there is one thing we have all learned from relationships with government today, it is that they impose a vast array of involuntary exchanges on us. Further, every new progressive proposal would add to their extent. That is the real reason their advocates like the “scarcity mindset” misdirection—honesty and clear thinking cannot defend their positions.