Three classic paragraphs from Chapter 1 of Thomas Sowell’s Applied Economics:
Politics and the markets are both ways of getting people to respond to other people’s desires. Consumers deciding which goods to spend their money on have often been analogized to voters deciding which candidates to elect to public office. However the two processes are profoundly different. Not only do individuals invest very different amounts of time and thought in making economic vs. political decisions, those are inherently different in themselves. Voters decide whether to vote for one candidate or another but they decide how much of what kinds of food, clothing, shelter, etc. to purchase. In short, political decisions tend to be categorical, while economic decisions tend to be incremental.
Incremental decisions can be more fine-tuned than deciding which candidate’s whole package of principles and practices comes closest to meeting your own desires. Incremental decision-making also means that not every increment of even very desirable things is likewise necessarily desirable, given that there are other things that the money could be spent on after having acquired a given amount of a particular good or service. For example, although it might be worthwhile spending considerable money to live in a nice home, buying a second home in the country may or may not be worth spending money that could be used for sending a child to college or for recreational travel overseas. One consequence of incremental decision-making is that increments of many desirable things remain unpurchased because they are almost–but not quite–worth the sacrifices required to get them.
From a political standpoint, this means that there are always numerous desirable things that government officials can offer to provide to voters who want them–either free of charge or at reduced, government-subsidized prices–even when the voters do not want these increments enough to sacrifice their own money to pay for them. The real winners in this process are politicians whose apparent generosity and compassion gain them political support.
It’s worth repeating that first sentence: “Politics and the markets are both ways of getting people to respond to other people’s desires.”
Keep that in mind as you go about your day and interact with others. The stuff you buy, generally, is so readily available that you take it for granted. There’s a reason for that. Markets are excellent ways to get people to respond to other people’s desires.
Politics, on the other hand, is a different story. In the remaining of the three paragraphs above, Sowell does a superb job of laying out part of the reason. Categorical and economic decisions are different.
If I want to buy a cup of coffee, it’s cheap and available. Because I’m willing to buy it, thousands of people from the growers in some far off land, shippers, roasters, the companies that make the brewing equipment, cups and lids and the people who brew it up for me all coordinate to give me what I desire — I didn’t even have to ask them. There was no coffee czar or government task force on coffee to bring it to me.
Further, I can choose from an assortment of sizes, flavors, roasts, brewing methods and creamers to make it the cup of coffee I prefer, while the next guy in line can choose something very different.
Contrast this with things provided by the government. A good deal of people have to agree on a one-size-fits all solution. There’s very little room to take into account personal preferences.
What are the chances you’d get the coffee you prefer if the only type of coffee available would be the one that everyone voted for or even just the one that sold the most? If you’re not a coffee drinker, expand that example to all beverages. What are the chances that you’d get the soda, martini, tea, juice, milk or energy drink you prefer if the government decided that we have too many beverages to choose from and we have too much of our “nation’s” capital invested in beverage producing resources, so we only need two beverages – water and 2% milk?