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True Irrationality

Encountering daily Trump’s (and many non-Trumpians’) hostility to immigration, as well as Trump’s (and many non-Trumpians’) hostility to free trade, reinforces the sad truth that large numbers of my fellow human beings believe that prosperity springs from scarcity.  The fewer are the workers in our economy, and the fewer are the goods and services in our economy, the richer we all will be!

Of course, those whose minds are enfeebled by such economic ignorance cannot be expected to be consistent.  Many of the same people who praise the higher prices brought about by import restrictions, and who joyfully predict that higher wages will result from further restrictions on immigration, bemoan and protest the higher prices and profits brought about by natural disasters (while they simultaneously praise the rebuilding made necessary by the disasters).  Scarcity is enriching, except when it is impoverishing.  Higher prices are evidence of sound economic conditions, except when they are evidence of unsound economic conditions.


Numerous logical fallacies are afoot in discussions of trade and immigration, but none so frequent or so dangerous as the fallacy of composition.  It is true (it really is) that I am enriched if government protects me from competition – either directly, by preventing other human beings from competing for my job, or indirectly, by preventing other human beings from offering goods or services for sale in competition with the goods and services that I offer for sale.  My resulting higher wages or the higher prices that I fetch for my wares are real, and they really improve my well-being.

But from where do my greater riches come?  The likes of Trump and Sanders and Schumer and Graham and Navarro and you-name-the-proponent of government-enhanced scarcity want everyone to believe that my greater riches come from foreigners or from idle, rich oligarchs who employ foreigners or who retail in America goods made by foreigners.  And more: Trump, Sanders, and other scarcityists assure me – and assure my fellow citizens – that I deserve my increased prosperity, as if I actually earned it.

In fact, of course, much of my artificially increased (and undeserved) wealth comes from my fellow Americans – from the pockets and purses of those who pay higher prices to buy my wares, as well as from the wallets and bank accounts of those who work at jobs less attractive because the resources that are artificially directed to me by government policies are not available to support firms and industries that would otherwise exist and that would offer better employment opportunities.

All that is seen are my higher wages, my increased income, and my higher standard of living.  “Hey, just as it’s true that if everyone stands up at the baseball game everyone will get the same improved view that is gotten when one person stands up at the baseball game, it’s also true that if government artificially increases the scarcity of goods and services in a way that raises my standard of living, government policies that increase scarcity for the nation as a whole will improve everyone’s standard of living!  What could be plainer?!”


Richard Thaler is the second scholar (Daniel Kahneman is the first) to win a Nobel Prize in Economics for documenting that individuals in markets do not behave as rationally as they behave in economics textbooks.  Whatever you think of behavioral economics, and whatever you think are the likely real-world consequences of such ‘irrational’ behavior, all such irrationality is indistinguishable from the wisdom of Solomon and the rationality of a full-breed Vulcan when compared to the irrationality of the beliefs that daily guide thinking and commentary about economics and politics.