“There are no solutions, only tradeoffs.” Be afraid of the absolute certainty yielded to 'authority.'

Staying Out of the Corner | The Freeman | Ideas On Liberty

Posted March 24, 2011 The Calling | Steven Horwitz

In economics, one of our favorite concepts is tradeoff. In a world of pervasive scarcity, every choice has a cost. Recognizing this fact about the human condition should lead us to see the world in terms of marginal benefits and costs. As we think about how to allocate our time and resources, we need to ask whether devoting the next unit of one those things toward a goal is really worth more than what will be given up.

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The irony is that to the extent resources are allocated by a central authority spending other people’s money collected by force, marginal costs and benefits aren’t likely to be taken into account. In contrast, decentralized price-guided allocation through private property — and the responsibility that follows ownership — is far more likely to produce wiser decisions at the margin.

Do I know that more lives would be saved by not making the buildings safe from 9.0 quakes and using the resources elsewhere? No, I don’t. But I do know that, in Tom Sowell’s words, “There are no solutions, only tradeoffs.” What Sowell means, and the lesson I want to impart, is that the wise use of resources cannot eliminate all bad things in the world, so we need to ask whether the sacrifice at the margin isn’t greater than the gain. That question puts the economic way of thinking in the service of humanity and probably saves lives.

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