Wednesday, October 31, 2007

An Interesting Puzzle with an Easy Answer

Overcoming Bias has a cool conundrum "directed to Free Market admirers." Since I qualify, I'm posting my answer.

The conundrum is this: in a company of 100 employees, there is a sure chance to make $1billion in profit if either (a) a specific employee dies or (b) 3 randomly-chosen employees die. Now, let's suppose the specific employee in question will not agree to the option in which he certainly dies, but all 100 employees are willing to take the slightly greater than 3% (precisely 3.0305%) chance that they will be chosen to die in exchange for $1million of the profit. In other words, the company can bribe its employees with $1million bonuses to get them all to agree to a random-selection process in which three will be chosen to die.

The question is this. As a government regulator aware of the situation, do you


  1. intervene and prevent the company from from completing the job?

  2. not interfere?

  3. force the specific employee to complete the task and then force the company to give $5million to each of the remaining 99 employees?



Now, of course such a situation is so extremely unlikely to happen in reality that some may say it's not worth considering. But I happen to be one of those who thinks intuition pumps like this are useful philosophical exercises - and I happen to find this one particularly useful as a "test" for that peculiar disease known as "Libertarianism." This is because not only is there a "correct" answer for any true Libertarian, but the circumstances of this particular problem get right to the heart of the matter and really test a person's conviction in free market principles.

The correct answer, of course, is unequivocally (2). And here's the cannonical Libertarian reasoning for why: if people do not own themselves, then it's hard to see how we can be sure a system of ownership is actually functioning. If we really believe in individual rights and liberties, then people are free to risk and even give up their lives if that is what they truly desire. Whether or not $1million is "enough" in exchange for risking one's life is debatable - but that is a decision left to the individual - i.e. the person who actually owns/is the life in question.

Of the three options, the WORST one is (3). No one - and ESPECIALLY not the government - may coerce anyone else to give up his life or property except in cases of self-defense. In the Libertarian universe, people who favor option (3) are the lowest of the low - true enemies of liberty and property.

Option (1) is what we expect from most of the population. It's what you might call the "Democrat" option. It's coercive in the sense that the regulator purports to know better than the people themselves what decisions they ought to make, and we reject it for that reason. But it at least has the virtue of not being option (3). The regulator is (unfairly) removing extraordinary options from the table - but he is at least not coercing anyone to do anything extraordinary (like submit to being killed) either. This is, I think, why Libertarians are often mistaken for conservatives: we have less of an aversion to enforcement of the status quo than we do to "social engineering" projects that force people to act in such a way that will be "ultimately to the benefit of us all." Option (1) is soft regulation, option (2) is hard, Soviet-style regulation.

One of the commenters on the original Overcoming Bias thread makes a point that I very much agree with - that option (3) is deceptive in the sense that it doesn't mention the full cost. The full cost of an option like (3) is much greater than just the individual employee's murder - because we're also agreeing (implicitly) to a system where governments can intervene in private affairs to such a level that they can specify who lives and who dies for arbitrary reasons and control economic policy to such a minute level of detail that they regulate how much companies give their employees in bonuses. To clear the fog a bit - there is no guarantee in such a system that you get to keep your $5million in the long run; property doesn't have any real value under such an arrangement.

Indeed.

This is why it is frustrating to hear things like what the New York Times thinks about S-CHIP. To listen to them tell it,



The health of millions of children who lack insurance cannot be held hostage to the president’s visceral distaste for government and its essential role to protect the weak, or his desire to protect the tobacco industry.


This is a tired old tactic: trying to contrast Libertarian "theory" that small governments are better with the actual "on the ground" children who will benefit from S-CHIP. Fine, as far as that goes. The trouble is that reality goes much further. If we could only confine things to the issue at hand, then the New York Times might have a tiny bit of a point. But in reality, we can't. In reality, when you give the government the power to take money from people to give to (what it classifies on its own terms as) "needy" children, you are giving the government the power to take money PERIOD. Perhaps it is not your intention to expand government power - but by expanding government power you are ... expanding government power. Every little tax and every little spending program we approve is just that much more of the total wealth and property we produce that no longer belongs to us. As Ronald Reagan aptly put it - "you cannot control the economy without controling people." It IS about control. Whether or not it is the intention of the authors of these spending and welfare bills to increase government control over our lives, that is the very real effect. In other words, our "theory" isn't just academic, it's real.

And as the commenter points out, this moral puzzle illustrates that point well. It's nice to think that with a one-off regulation we could give everyone $5million - but there is no possible world in reality where any such thing ever happens only once. For it to happen at all, the government would have to have virtually unfettered power. Unfettered power is not something any government ever uses "only once."

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