Benjamin Franklin and Self-Interest

B. Franklin has been my favorite historical persona since my 5th grade history report, and in light of an upcoming trip to Philadelphia I have returned to a biography on him written by Walter Isaacson. In it he describes what economists mean when we talk of self-interest and how it benefits society better than I think I ever could have. Here is the excerpt:

A fundamental aspect of Franklin's life, and of the American society he helped to create, was that individualism and communitarianism, so seemingly contradictory, were interwoven. The frontier attracted barn-raising pioneers who were ruggedly individualistic as well as fiercely supportive of their community Franklin was the epitome of this e of self-reliance and civic involvement, and what he exemplified became part of the American character.

A great description of self-interest and its results for society!

The Charity of the Uncharitable

There is a famous paper by economist Gordon Tullock on why people vote for taxes that carry out actions one could do on their own, known as "The Charity of the Uncharitable." To restate this, Tullock asked why people would vote for a $100 tax to support some transfer to the poor instead of giving the $100 of your own free will to the poor (or some other charity). After all, either way it costs you $100, but the taxes force everyone (not just yourself) to give $100 to the poor. Why force others to be charitable when they may need that $100 for their own survival or charity of their own choice?

Tullock believed that since people innately realize, even if they don't acknowledge it, that their democratic vote doesn't matter. It is extremely rare for any election to be decided by one vote, thus usually your vote doesn't change the outcome. Given this, you are less likely to vote your true preferences and satisfy what he called internal dissonance, which is internal conflict between wanting to be charitable and simultaneously wanting to be greedy. Since your vote doesn't matter, you may as well vote for the tax to satisfy your charitable side but then privately behave greedily, allowing you to satisfy two conflicting desires.

The reason I bring this up? Scientific American reports that research has found that the brain responds the same way to paying taxes that directly fund charity as it does when money is being given to charity. Perhaps this is the biological proof of Tullock's theory. If you read the article, you will also see that people give less to charity individually than they do when paying taxes. It is however, not a definitive study, as it has several limitations many of which are mentioned in the article.

Quantity Supplied and the Deathly Hollows

CNN reports on the retail competition side of producing the final Harry Potter book in a way that closely describes the supply curve discussed in principles. Also, this demonstrates the move to zero economic profits of a perfect competition. As the price falls (they use the term "discounting" but this is not quite correct) notice that some bookstores choose not to sell the book. This is a movement along the supply curve.

Why Tastey Animals Live Forever

What is the difference between Lions, Elephants, and Tigers from Chickens, Pigs, and Dogs? The former 3 cases you aren't allowed to own and they are going extinct, the latter 3 cases you are allowed to own and have a thriving population. In class, I gave several examples of how private property rights can save endangered animals (recall Lobster Fishieries in New England vs. Port Lincoln, Australia; the Black Rhino in Africa which can also be found on page 39 in your textbook). The Wall Street Journal reports a new case with Bison, where decades of conservation regulations barely kept the species from going extinct, recently assigned private property rights to ranchers has caused the Bison population to grow dramatically over just the last few years.

My thanks to Mark Gillis for the link.