Incentives

April 11, 2010

Incentives

The foundations of Austrian Economics are spelled out in the book, “Human Action” by Ludwig Von Mises. The whole of Austrian economic theory is based on the single fact the humans act purposefully. Man adapts to his situation by doing whatever he believes will achieve his goals, that is, to satisfy his wants. His situation of the moment provides the incentive for his actions.

For example, man’s basic physical wants, food, clothing and shelter, are not to be had for the taking. They give him the incentive to work to earn the money to buy these things. The purpose of his work is to support himself, his wife, and children.

Of course, in a situation where there is little or no risk of being caught and punished, these wants could provide the incentive to take them from someone else, by fraud, theft, or armed robbery. There are places in the world today where bandits are free to plunder without restraint. In such a place, there is little incentive to acquire wealth by any other means than banditry, since bandits will just take it from you.

There are many more civilized countries today where governments will do the plundering for you. This is the welfare state. Politicians in power, whether by stealth (inflation) or armed robbery (income tax) steal our hard-earned money to buy our votes with welfare.

Even more effective in recent years, the politicians can “buy” campaign contributions by passing laws favorable to special interest groups, in order to get re-elected. Apparently, voters will vote for the name and face most effectively placed before them in the newspapers and on TV. The voters act purposefully but not very wisely.

Basic to all the nasty results of human action is the power of government. That power attracts the worst sort of people and corrupts better people. It corrupts voters who become willing to live off the proceeds from theft, so long as government legalizes the theft. Robin Hood Has moved into City Hall.

Altruistic politicians find they must compromise their ethics to get elected, and then to get re-elected. At best, it enables altruists to force upon us choices that we would not freely choose for ourselves. In the words of Ludwig Von Mises, “Government is the negation of liberty”.

Please, somebody invent government without power.

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