Dear Friends,
It seems to me, incentives count, in every facet of human existence. People can be relied on to do what is in their immediate interests. Long term interests however, have less bearing on what we do, because the consequences are distant, while the consequences of short term actions are at hand, so they count more. As more negative incentive build up in society we can reasonably expect more negative actions by people. This is a fundamental fact of economics. That is why the incentives in a society are possibly the most important factor in the real standard of living of that society.
If the building you are in is on fire and you are trapped in a room on the 20th floor, what can you do? Jump out the window, landing is simply the next problem you have to solve. The world we live in demands immediate actions and our thinking has evolved to satisfy those needs. When we get up we think about the day at hand and not so much about the coming year. It is mere human nature. So when our immediate needs and wants are blocked by regulation, or encouraged by culture, we react within those constraints. The long term results of those actions are rarely considered.
Governments around the world have taken on a new role in the lives of people, to mitigate the negative consequences of negative behavior. Even a cursory look at the goal of most modern regulation and laws illustrates the point. Abortion free of charge and for any reason is one such example. It’s sole purpose is to allow people to engage in socially damaging conduct without short term consequences. What is the welfare state except a means to encourage men to abandon their families? Even a seemingly benign law like Social Security encourages profligate spending during the high earning years of a person’s lifetime, despite the fact it leaves people with insufficient funds to actually retire on.
Economic incentives that are socially damaging abound. Regulations that demand banks lend money to people who cannot pay that money back directly led to the banking crisis of 2008, environmental laws that drive businesses into bankruptcy fill thousands of pages, while unemployment benefits are extended regularly, the Federal Reserve is printing billions of dollars a month to mask the negative effects of government policies, like high taxes and stifling regulations, savers are punished by the low returns driven by the Federal Reserve’s monetizing the debt while spenders are encouraged, class warfare are encouraged by the elite, while government officials are allowed to skirt their own laws with almost total impunity.
These are just the tip of the iceberg of negative incentives government rakes our virtues with. Many are a crass means to grasp political power, by manipulating our compassion, only serving to increase the very things they are supposed to eliminate. Perhaps the most pernicious thing about negative incentives is the way they lower the outcomes of individuals. There is a story about a woman in her 60s who lives in her father’s basement, while her father, in his 80s, travels the world. If we apply that story to the next generation, their economic outcomes will be lower than hers, and the next’s will be even lower. As government creates more and more negative incentives the economic future of each generation gets worse and worse. Eventually lowering the economic outcomes of Americans to that of the third world.
Young people, who are most negatively effected, get to have their immediate wants met. Sex with strangers at any time anyplace fueled by changing cultural mores and free birth control, if that fails, (or they fail to use it), free abortion on demand is the backup. This clearly leads to a promiscuous society. Those babies that slip past the abortionist’s knife are born fatherless, because the State is ready to step in and take his place. This leads to men who never mature. Why save when the savings of others are at your disposal? The elite have created a system where virtuous behavior is punished and bad behavior is rewarded. Is it any wonder there is so much bad behavior? It can truly be said that today’s young people will pay the highest price.
Now we stand here, reading the latest results of the negative incentives our society and government promote, aghast at the news we are assaulted with daily. The knock out game both horrifies and befuddles us, school shootings become more common, people have less money for retirement, wages get lower even as jobs get fewer, 60 year old women live in their father’s basement, while he travels the world, and our own government monitors us with increasing intrusiveness, to counter the negative incentives… and we sigh, how could this happen? In our hearts we know, but we are loathe to do what it takes to turn the ship around. The right thing is always the hard thing, because it is painful in the short term, for rewards in the long term.
Sincerely,
John Pepin
