A bittersweet classic with a sneaky economics lesson
There’s a popular short story; The gift of the Magi, by O.Henry.
It revolves around a young couple, Jim and Della, before WWI. Its only 6 pages long so if you're not familiar give it a read before I spoil it.
I first read it as a child, and recall being quite taken with its stark imagery and quiet desperation.
I still don't know if I prefer it as a tragic tale of pointless waste, or a celebration of sacrificial devotion.
Now, through adult eyes, I realise its a beautiful illustration of what Austrian economists call 'The Knowledge problem'
No adult knows enough to be qualified to make financial decisions on behalf of another adult.
A state actor can't know whether I'd prefer one new pair of shoes today or an icecream every Saturday throughout Summer.
They can guess, but they get it wrong for almost everyone in almost every way.
In order to be qualified, logistically and ethically, to make decisions for somebody else, one must:
Have their best interests at heart - Benevolent
Be the one paying the cost. - Liable
Know their preferences/desires. - Familiar
Know their exact circumstances. - Current
Let's give the public servant the benefit of the doubt and assume he's a genuinely 'Benevolent' idealist with our best interests at heart.
Whether he's right or wrong, he's still not holding the bill at the end of the meal, so that's a red mark against 'Liable'
Nobody can know the ordinal preferences of millions of strangers, so he fails 'Familiar'
His precious statistics are typically years old, so the information he substitutes for knowledge isn't 'Current'.
Jim and Della score much better.
Full marks for benevolence; they sacrificed their most precious posessions for the sake of their partner, so they also win a big tick for liability.
Each of them knew the deepest desires of the other's heart, so they were certainly familiar.
Their only failing is the currency of their information. Being right yesterday isn't enough.
They were so close
They each fulfilled 3 of the 4 requirements, yet both still failed utterly and completely in meeting their goals.
The public servant is way off
Even blindly accepting his earnest assertions of civic altruism, the bureaucrat can never be qualified to make good decisions on behalf of others, he'd need to tick two more boxes to be as close as Jim and Della, and he still wouldn't be qualified.
The happy news, is that there is a person who has both the heart and the mind required to make good decisions about your life.
Have a fantastic day
A beautiful and artful explanation! I'm going to tweet a link to this on my @libertarianarts account; I'm always on the lookout for the intersection of literature and economics.
And here it is:
Wow. Thanks heaps, geke. My rep has been 49 for so long I thought I'd never get the half century. Four new followers too :)
Wow, Matt. This a beautiful and moving illustration of simple truths. I enjoyed your writing and revisiting this old tale. What a profound parallel to have made. Like the story used to illustrate the point, it was laid out in perfect, pure, simplicity.
Thank you.
Thankyou for your kind words, melissag. I'm really enjoying this platform as an intellectual outlet :)