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by Gary Galles | Malibu The word marginal sometimes means “barely adequate, if that.” Americans don’t lack marginal politicians in that sense. But marginal also means focusing on the actual trade-offs involved (typically not all-or-nothing, but somewhat more of one thing and somewhat less of another) in changes from the current situation. As that focus is often obscured by political language, we could use more marginal politicians in that sense. Failing to think at appropriate margins is a staple of politics. For instance, politicians are always telling people what they are for. But that is typically not what citizens really want to know, since politicians are largely “for” the same things (e.g., peace, our “general welfare,” etc.) and “against” the same things (e.g., corruption, special interests). What we most want to know is the rate at which they would trade off one thing they are for against other things they are for or at which they would accept what they are against to get more of something they are for--i.e., at what price they will “sell us out” on a particular issue. Relentlessly invoking “need” is a prime example of failing to think at the margin. Since choices are typically between different “needs,” the word diverts attention away from the actual choices faced, adding confusion rather than insight. And since the word’s primary political use is to assert that someone ought to have something they don’t, it distracts from the real question: How much should A’s supposed need require B to pay for A’s benefit? “We” also generates confusion when things are to be provided to some from tax revenue, because of disproportionate distributions of government benefits and burdens. The upshot is that when people argue that we (the government) should provide certain goods and services, they mean “someone other than me” should pay. Without clearly spelling out who will actually be forced to pay how much, so we can recognize the real tradeoffs, we cannot adequately analyze programs or proposals. Misunderstanding marginal choices is also caused by categorical thinking. For instance, someone might assert that one thing is more important than another. However, the relative values of different goods actually depend greatly on circumstances and preferences (e.g., one might assert that food is more important than sleep, but most of us disagree when our alarm goes off in the morning). Using such inaccurate language makes confusion inevitable. The mirage of central planning “solutions” also results from failing to think in marginal terms. Those who find planning the cure for everything ignore the fact that markets and the prices they generate are the only way we accurately discover people’s willingness to trade off between goods. When government short-circuits market processes, it makes that crucial information unknowable to central planners, requiring that they throw away the mutual gains it would make possible. Failing to think at the margin blinds many to why trade is mutually beneficial. They think market exchanges involve equal values or even harmful exploitation rather than recognizing that in the absence of fraud, wealth is created because exchanges take place only when all parties expect their marginal benefit to exceed their marginal cost. Failing to recognize the gains from trade, they also fail to see the harm imposed on society from restricting or penalizing it, a fallacy behind a host of damaging restrictions on voluntary arrangements.
Marginal misunderstandings permeate public policy decisions, especially because people have far worse incentives to think carefully when spending other people’s money rather than their own. That is why thinking at the margin is valuable insurance against those selling political panaceas. Given the vast sea of electoral rhetoric that uses just such misrepresentation and misdirection to win political power, only such careful thinking can require politicians to actually defend their real positions to citizens, rather than baffling and befuddling them with misleading language and arguments, as is so common now. CRO copyright 2008 Gary Galles Mr. Galles is a professor of economics at Pepperdine University.

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