Sunday, March 30, 2014

Let’s talk about fairness.

As Joan Rivers always says “Can we talk?” Today let’s talk about fairness. I often hear a segment of the political spectrum calling for fairness as they run for this office or that. From the highest office in the land, to use a cliché, to the local dog catcher, politicians want to bring up issue of fairness. And once these folks have won their office we see them use the fairness argument to gain support for which ever policy it is that they want to implement. 

Most folks say this is all well and good. “How can you be against fairness?” After all we have been taught since we were very young to be fair to others. The problem with the question “How can you be against fairness?” is that it is one of those catch-22 questions in the category of “Do you still beat your wife, Senator? Please answer Yes or No?”

In economics we learn that there is no such thing as fairness. There is only a transaction between two parties. And let’s face it, all of life is a transaction. I have something you want and you have something I want and we make a deal. This transaction is nothing but a contract between you and me and the role of government is not to insure that the contract is fair but that the parties who have freely entered into the transaction follow the rules and that the rules are lawful.

There is a sharing rule in the Boy Scouts and it works this way. If two boys have a candy bar to share then one of the boys divides it and the other boy then gets to pick which piece he wants. You will be amazed at how equal the two parts of the candy bar are using this process. The rule is one that has been around for a long time in the Scouts. I learned it some 60 years ago when I was a Cub Scout. 

As Milton Friedman said: “The most important single central fact about a free market is that no exchange takes place unless both parties benefit.” There is no such thing as fairness only transactions that benefit all the people making the transaction.


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