
04 Aug Are we free to buy a garbage bag for a thousand dollars?
This week, I shared a TikTok video with my son Santi. In the video, someone was criticizing a very famous clothing brand for selling a garbage bag at ridiculously high prices. After watching the video, Santi came to me and asked: “Dad, but if everyone in the world has money, if there are no more poor people, and if all their problems are solved, why couldn’t someone buy these things?”
Rivers of ink flood the fields of economic science with questions like this and all their possible answers.
There’s a group of economists who would agree that people should be free to buy a garbage bag for a thousand dollars. People are free to do so, and since individuals are rational agents, the decisions they make will always be the right ones.
On the other hand, there’s another group of economists who believe it is the Government (the “paternalistic Government “) that should decide what we consume and what we work on. Whether it’s because it’s immoral to spend so much money on a garbage bag while so many people in the world are poor, or because such spending harms the environment excessively, this group would likely advocate for the Government to limit people’s consumption.
There are strong arguments behind both positions. Support for freedom has endured (and continues to do so) against many opposing views because, in my perspective, it is remarkably simple. Let’s think for a moment about a scenario where people are not free to buy whatever they want. Two questions immediately arise, seemingly simple but forming a monster capable of devouring any argument: Where is the line between the good and bad things one can buy? And, more complex still: Who draws this line? A government bureaucrat?
Now let’s examine the other group.
Are we humans truly rational? Are we capable of choosing what is best for us? Until some years ago, the main criticisms of the so-called rational agent were theoretical, with Amartya Sen being one of the foremost voices in these critiques. However, today, these criticisms also come from the empirical realm.
Behavioral economics, psychological tests, the study of cognitive processes, and brain scans suggest that humans are far from rational and, worse still, we are highly susceptible to influence and reluctant to change our behavior. “Better the devil you know than the devil you don’t.”
Here’s an example:
How do you choose a salteña? My Twitter friend Mauracio is known to choose his without olives. But beyond that, why did you buy the specific salteña you did? Was it because you tried all the salteñas in the city of La Paz, ranked them from best to worst, and then selected the one you liked the most (which is what a rational agent theoretically does)? Or did you simply buy the same salteña you always do without trying other options?
It seems many of us act inside the second way. In my case, supersalteñas will always be my choice, even though I know the ones from Patikos are excellent.
In this context, if we are like this, should the Government solve our problems? Should the Government protect us from financial contracts? Should the Government protect us from unhealthy food? Should the Government force us to consume cultural works we might not be interested in? Should the Government protect us from poor medical practices? Should the Government compel us to make good decisions?
And this is where, when trying to answer these questions and set limits, the argument for freedom emerges as a solid beacon. A giant, bright, and beautiful beacon… which, nevertheless, seems to guide us to dangerous shores.
Today, economic science is discussing these issues; that’s why it’s science—because there are no arguments written in stone.
Finally, if by any chance you meet my Santi, tell him his dad is still searching for a proper answer to his question. Tell him I’m digging through my economics books for that magical answer that doesn’t exist. Tell him his dad thinks it’s wrong to buy a garbage bag for a thousand dollars, but he still doesn’t know why it’s wrong.
S. Mauricio Medinaceli M.
La Paz
August 4th, 2022
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