The first thing one learns from economics is what figured at the beginning of Paul Samuelson’s famous college textbook: society must choose between guns and butter. This allegory represents the primordial fact that resources are scarce compared with infinite human desires. It’s true even for trade union activists and social justice warriors, who are always chasing money. Although the idea of scarcity looks quite obvious once formulated to anybody who can read and count and perhaps a bit more, its understanding has momentous consequences.
A literal illustration of the old Samuelson allegory is provided by North Korean dictator Kim Jong Un, even if he is certainly not the most economically literate person on earth (Dasl Yoon, “While Kim Jong Un Shows World ‘Fire and Fury,’ He Projects Different Message at Home,” Wall Street Journal, October 18, 2022):
Even the munitions industry has been mobilized to aid farming efforts. In late September, North Korea’s munitions industry displayed some 5,500 new farm machines, parking the green-and-red rice threshers in neat rows at a town in South Hwanghae province. … The equipment was reportedly gifted to local farms by Mr. Kim himself.
Only later will a careful student of human affairs learn from economics another crucial idea, which seems so difficult to understand that even some brilliant economists don’t get to that point: it is not “society” that chooses between guns and butter, but either the government or every individual for himself. The theory that individual choices are capable of solving the fundamental economic problem of scarcity more efficiently than social choices, meaning rulers’ choices, did not develop until the 18th century.
The fact that international sanctions against “North Korea” have compounded the country’s problems helps understand that society and the state are two different entities between which the distance increases as a direct function of the state’s power. The more powerful the state, the more different it is from society. In a classical-liberal regime, there exists an interface between individual demands and state activities, a reality vividly modeled by James Buchanan and Gordon Tullock, although all liberal theorists have been involved in this inquiry. In a tyrannical regime, of which Kim Jong Un is a real-world caricature, there is little interface, and international sanctions are likely to hit the despot’s subjects much harder than the despot himself and his collaborators. In such a situation, the ruler’s choice of guns over butter means starvation for many:
Nearly 70% of North Korea’s people will face food shortages this year, according to estimates released by the U.S. Department of Agriculture in September. … “Fewer houses in rural areas are seeing smoke coming from their chimneys, suggesting there is nothing to cook at home,” [Lee Sang-yong of Daily NK, a news website focused on North Korea] said. … Meanwhile, the regime is dedicating much of its budget to military advances. … North Korea has conducted 27 missile launches his year, more than any other previous year.
Everybody in the classical liberal tradition must feel sympathy for the poor, exploited people. In a free society, these people would have more butter and also some guns to defend their liberty. Liberty pushes up the production possibility frontier (PPF). Trade-offs are still required, but their locus is mainly in each individual’s choices.
READER COMMENTS
Thomas Lee Hutcheson
Oct 21 2022 at 12:13pm
The theory that individual choices are capable of solving [most of] the fundamental economic problem of scarcity more efficiently than social choices, meaning rulers’ choices, did not develop before the 18th century.”
I wish Libertarians would just come out from behind mostly true generalizations to help liberals ameliorate real problems: externalities exist, public goods are a thing, health and safety regulations can improve health and safety although there is no guarantee that they will, many people cannot adequately self insure against major risks and life events like unemployment, ill health, and old age.
Jon Murphy
Oct 21 2022 at 11:19pm
Are you unaware of the work of Coase, Buchanan, Tullock, North, Ostrom, and pretty much anything coming out of GMU, Texas Tech, Syracuse University, just to name a few?
I wish some economists would stop pretending that there has been no advancement in theory of public goods and externalities in the past century and actually engage in real problem solving rather than chanting “carbon taxes” as if it’s a Pareto improving, or even socially desirable, thing.
Thomas Lee Hutcheson
Oct 24 2022 at 4:00pm
I am not aware of a work by any of these people that shows that the optimal tax on net emissions of CO2 is zero. As for GMU, my impression is that both Cowen and Tabarrok support taxation and or regulation to reduce emissions into the atmosphere of CO2 and particulates.
Pierre Lemieux
Oct 25 2022 at 8:19pm
Thomas: Tabarrok, I don’t know. Perhaps Cowen, but in his Stubborn Attachments, he argues mainly for growth and, in case of conflict between economic growth and “sustainability,” he would choose growth:
My review of this book might have been a bit too enthusiastic, but I am not sure. One of his strong theses is that
So forget about cost-benefit analysis, even if you find some theoretically moral redemption in coercively some imposing costs to some in order to benefit others. If “we” could have already added a couple of hot degrees to the climate, imagine how the poor Ukrainians would be less miserable this coming winter.
Spencer
Oct 21 2022 at 2:11pm
It was solely the Pentagons’ fault that the U.S. $ ceased to be convertible into gold, as the private sector, contrary to the public sector, ran trade surpluses up until that time.
The funds being borrowed do not increase our productive capacity, nor increase the efficiency of the work force. Rather the funds are used largely to finance transfer payments to non-productive recipients and to finance “dead-weight” military hardware.
Since the goods and serves being finance by these monstrous deficits are not offered in the marketplace, additional and un-necessary inflationary and interest rate pressures are generated in the economy. And the magnitude of these deficits guarantees that a significant proportion of these deficits will need to be
monetized.
They are war economy budgets and therefore, require the controls dictated by a war economy in order to be properly funded.
The mal-distribution and mis-allocation of available savings, or mal-investment, is exacerbated thereby reducing future gains in productivity and incomes.
Monte
Oct 21 2022 at 5:02pm
Interesting that you should choose Samuelson’s introductory textbook to illustrate this concept, given that the coining of the phrase “guns and butter” has been traced to William Jennings Bryan and that the PPF was first formulated by Austrian-American economist Gottfried von Haberler. Samuelson’s numerical/graphical example is a good one, however, and found in his chapter on “Basic Problems of Economic Organization” (Economics – Samuelson/Nordhaus, 13th Ed.).
I was thoroughly watered down with Samuelson’s “canonical” textbook and it’s neoclassical synthesis in my freshman year, several ideas from which it took me many years to recover (“…the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.”). Even so, it’s a wonderfully laid-out introduction to economics, one that Prof. Samuelson promises students will be a “once in a lifetime” experience.
Mactoul
Oct 21 2022 at 9:51pm
Arnold Kling had a slogan at this very blog– Lose the We!
Perhaps now libertarians disavow that prescription and talk about “society”. But is this again a thin version of actually existing societies which are formed essentially from unchosen obligations of family, and higher level communities?
I recall the definition in one of your articles– of a people– collection of individuals sharing a geography and certain preferences. This struck me as pretty inadequate.
Pierre Lemieux
Oct 21 2022 at 10:56pm
Mactoul: Perhaps you don’t know that Samuelson was notoriously not a libertarian, or else you didn’t read up to the 4th paragraph of my post above, where I write:
You may also like to read my Econlib article “The Vacuity of the Political ‘We’.” You will note that Samuelson, although notoriously non-libertarian (sorry to repeat the obvious), was a good economist and, despite his linguistic slips, did not believe that society could be personalized.
On “the people,” another unicorn, I recommend my Independent Review article “The Impossibility of Populism.”
Mactoul
Oct 22 2022 at 11:24pm
As family is formed through complementarity of male and female, a polity is formed through complementarity of the ruling and the ruled.
In a democracy, of course, people rule and ruled in turn.
The ruling element is the thinking element essentially, and forms the mind of the polity (being in turn formed by the pre-existing mind of polity).
Of course, there is constant struggle within the ruling element itself. The individuals that comprise the ruling element struggle to realize their individual vision of the essence of a particular polity.
This is the language one must perforce use to talk about things like society deciding.
Pierre Lemieux
Oct 23 2022 at 11:09am
Mactoul: With due respect, this is pre-scientific and magical thinking:
Is that Menenius Agrippa (493 B.C.)? Let me quote, just as another example, from my “The Impossibility of Populism” (the reading of which introduces to some elements of modern political theory):
Mactoul
Oct 24 2022 at 5:18am
Despite appearances, my statements are strictly descriptive and actually describe the modern free societies best.
The constant discussion in the press, congresses, town halls and now blogs — what else is there but constant struggle to realize individual vision of what should be?
Jon Murphy
Oct 23 2022 at 11:34am
How are you using “complementarity” here? In the ordinary sense of “a complementary relationship or situation” or the legal sense of “the principle that jurisdictions will not overlap in legislation, administration, or prosecution of crime”?
Mactoul
Oct 24 2022 at 5:24am
The term is used in its ordinary sense.
Pierre Lemieux
Oct 23 2022 at 12:09pm
Mactoul: I just stumbled on an interesting passage of Émile Faguet, Le Libéralisme (Paris, 1903):
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