“We pretend to work, and they pretend to pay us” – Old USSR Saying (possibly apocryphal)
Yesterday we took up the topic of immigration. My main points were nothing new:  Christians probably ought to have a compassionate attitude toward those fleeing oppression and looking for a better life here and  as long as we live in a “majority-rule-tyranny” with little-to-no defense of individual freedoms, immigration is much the same as importing new [potential] slave masters. I, of course, prefer ending all federal power to take the production and livelihood from one and give it to another. And, once we have that, I prefer a very open and free immigration policy. (But in that order.)
On the topic of Amnesty, a good friend, Allen, rightly noted that people who had gone through the lengthy process of immigrating the right way would be legitimately angered if all those who came here the wrong way were given a free pass. The comment got me to thinking just about about the rules of life, individual decision making, the wisdom of the masses, and the efficiency of it all.
We all make decisions about our life. Sometimes they are short term decisions (should I go to the store today, and what should I buy) and sometimes they are long term decisions (what to invest in, how to save for my children’s education … or how to immigrate to the US). We make decisions based on our estimation of what will work out the best for us (or our loved ones). Certainly we make bad decisions sometimes, and good ones others, but our bad decisions have two major causes in this thesis: either we miscalculate what will actually work out best for us or the rules of the game change (or are about to change unbeknownst to us) and our former estimation of potential outcomes proves drastically incorrect.
For instance, if I buy cheerios at the grocery store this week and they go on sale for 50% off next week, then I’ll be mildly frustrated. Had I known they were going on sale I would have waited (which is, of course, why the grocer didn’t tell me). In the same way, if I wait in line 6 years for legal immigration status only to find out that free amnesty has been granted to everyone who jumped the border illegally, I will be frustrated … to say the least. Had I known that the rules of the game would change dramatically I would have done things differently (which is, of course, why nobody told me it would happen).
It will obviously happen in life that things change; there will always be unforeseen circumstances that, had we known, would have led to different decisions. Anybody who bought a house in 2006 (the top of the US housing bubble) can surely attest to this. But, alas, we are hard-pressed to know the future.
But there are times when uncertainty about the future is caused by policy decisions, or uncertainty about the next policy decision. Consider investing in the stock market, for example. Over the past decade or so, good decisions about buying (or selling) stocks have been less related to a value-based assessment of each individual company’s business model and performance, and more related to a guessing game about the next Federal Reserve policy decision. This is wildly inefficient. It throws away the individual wisdom and estimation capabilities that each potential investor brings to the table regarding the myriad investment choices and makes us reliant on vague notions of what Ben Bernanke might do next.
Or consider the case of an employer, who is uncertain about hiring new people not just based on economic uncertainties (which are aplenty) but also based on what potential regulations for employer-funded benefits and requirements will be coming down the pike next.
My point here is that sometimes game-changing events are just a part of life, and there is no way to predict them (e.g., the meteorite that just hit Chelyabinsk … bad time to build a factory there), but sometimes they are caused by policy changes at the federal and state level. Not all policy changes are bad, of course, but when the people spend more time focused on (fretting about?) what policy changes will happen next, they spend less time making decisions about what is the best next move for their lives and businesses (accessing the wisdom of crowds).
Better than a half a century of communist rule in various parts of the world should have taught us that centralized rule over decision making is inefficient. The reason the crowds make better decisions is not that they are inherently smarter, as individuals, than the all-wise central planners, but rather that each member of the crowd is better acquainted with his or her own needs, goals, and desires (their own personal “loss function” … for the mathematicians reading this).
In the same way, the guessing-game about impending policy changes takes us one step removed from the place where people can efficiently make decisions about their future (and their present). This is inefficient, it is too many cooks in the kitchen of your life. Just when you make a plan they come along and change the rules and extract more of your efforts for their own purposes. And if you had known, you would have done things differently.
There is naturally a sinister side to this, of course, as was the case in the Soviet Union. The government needs more and more of the productive efforts of the serfs in order to keep itself going and live up to the Granny State promises that have been made. They need you to work harder and keep less, and do so “willingly” in order to keep things afloat. When things run low you can bet that the next policy change will somehow take more out of your pocket and make a formerly reasonable decision look unreasonable … if you had only known.
(Sidebar – we’re all looking for ways to “save” for the future. Alas, dollars are hard to save because they lose value thanks to the government printing presses. You can move dollars to assets like houses, but with a mortgage interest deduction removal pending that might be a bad move. The easiest way to store value is gold, naturally, but as Mish has pointed out time and again, “they” will probably be coming after that store of value eventually. It has been too effective at allowing people to keep some of their own production. Will there eventually be confiscation, or perhaps just a 90% windfall profits tax? Either way, the government can’t abide letting you “win” – your life is theirs, you see.)
This all points to the problem of stability in government policy. If things are stable, you and I are inclined to make reasonable decisions that are beneficial to us. And if that were the goal of the government, then I suspect we would see policy stability (heck, even bad policies can be stable).
But let me not leave you on a sad note. Of course the government is unstable. It is a government of “we the people” – and we the people can be unstable too. But there is stability out there; peace, confidence, and a Rock to stand on: “I the Lord do not change. So you, the descendants of Jacob, are not destroyed.” – Mal 3:6.