Please note that my opinions are my own, and the opinions of the anyone or any institution quoted are theirs. The opinions expressed herein do not reflect the opinion of North Carolina State University, its board of directors, the College of Management or any other college, Student Media Authority, or WKNC Raleigh.

Wednesday, October 11, 2006

A Different View of Protectionism, or anti-Greenpeace (Stop Thinking Globally, for a second)

You have rights. In Hayek's version of capitalism, you have the right to lose your shirt.

Should I let you?

I think not. I have something to gain by protecting your wealth from your own destruction, even if the wealth does not change hands.

The idea goes that I should allow you to lose your shirt. Someone else gains that shirt, but is that really what happens? How do we define "cost," "gain," or "waste?"

If your own mistakes cause you to "lose your money," its a sunk cost, and your continued existence through support or subsidization would classically be viewed as inefficient.

If by some congruence of circumstance you should happen to be less risk-averse than average, and not inherently stupid as I supposed before, protecting your wealth may actually encourage some innovation.

By formulating some policy, or promoting the foundation of an institution that allows you to take on the risk of others less risk-averse than yourself, you receive rents and others gain a sense of security. Positive sum game. Period.

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