The Vegas Fallacy

Tibor R. Machan

It’s not just in Vegas but wherever there’s gambling (Monte Carlo, the river boats in Mississippi, etc.), a good many people who wish to win big—as opposed to those who just want to have some fun playing around at the tables—believe that somehow, against all odds, they will luck out. And a very, very few do, while thousands and thousands do not. All one needs so as to grasp this is to look at how fabulous the facilities are, how well the house is doing virtually everywhere, and how many people go home poorer than they were when they got there.

But they keep coming back. This is how the welfare state works, as well. Millions of people pay into the system, supporting massive bureaucracies and thousands of politicians, hoping that they will walk away the big winners some day. The politicians and bureaucrats keep promising the winnings but only here and there do they deliver. After all, even though the treasury gains its resources through taxation—in other words, extortion—and borrowing and printing, it still hasn’t enough to satisfy all the hopes and wishes that keep millions of faithful hanging in there rather than demanding that the game be shut down. Except that Vegas is more honest—no one promises that everyone will be a winner, only that some will be, whereas the champions of the welfare state tell everyone that government will help out—government will save us all from disasters, bankruptcies, ill health, ignorance, whatever. Vegas, yes, is far more honest.

But something similar to what keeps certain people coming back to the tables and the "one arm bandits" also encourages millions of citizens to keep their faith in the welfare state. "The next time my lobbyists, my representatives, my bunch of cheerleaders will surely succeed and I will collect the big benefits." Or perhaps, miracles of miracles, we will all be winners and no one will lose—so Social Security will never go broke! The educators, scientists, farmers, artists, merchants and all who hold out their hands waiting for the bacon to come home will all, very soon, get to be big winners.

Only it is a total ruse. Not even the extortionists who collect funds for the government have the kind of power that can get blood out of a turnip, who can make something from nothing. Even where honest budgetary constraints are absent, there is still scarcity, if only because the desire to get the benefits from the government is insatiable. Once a company, person, union or club is on the dole, the habit has been fed and the system is safe.

There are some folks, of course, who understand what a Ponzi scheme it all is but that teaching is drowned out by all the hucksters being paid to keep our hopes alive. The politicians will not tell us that they are ultimately powerless to satisfy us all. They will keep promising but delivering only bits and pieces, just to keep the habit alive. Entire industries have sprung into existence, teaching people how they need to apply for this or that government grant or subsidy. Weekend seminars abound, filled with hours and hours of instruction, banking on the largely empty hope that we can all get rich off the government, that there is some Peter out there who can be robbed so that we all, the Pauls, will benefit. Of course, Peter believes he is also a Paul, and so a daisy chain of attempted rip-offs is generated and continues with only a few souls out there yelling, “But it’s all a ruse.”

Is there a way out of this? The late Mancur Olson, author of The Logic Of Collective Action (Harvard, 1971), was pessimistic. He believed that only when a widespread and serious crisis occurs that destroys all the special interest organizations in a country, could lasting and fundamental remedies be implemented—such as a constitutional principle banning the financial corruption at the centers of the welfare state. Barring that, stupidity will pretty much impel most of us to continue to want to raid the nearly empty treasury and thus to keep the system going.

Perhaps, however, if there were widespread enough economic education—informing the citizenry that the bulk of us are losers, not winners, in the welfare state Ponzi scheme—we would not have to wait for the crisis Olson said might rescue us. But this brings up another problem: the educational system itself feeds off this scheme, relying as it does on taxation. Who in our high schools and colleges will tell students that the very system they rely upon to "educate" them is based on extortion and ultimate economic catastrophe? Maybe a few economist, but hardly anyone else. Once I was asked to be on a committee at my university that was considering what courses a public policy concentration should make a requirement. I proposed: economics. My chair at the philosophy department immediately removed me because I was supposed to promote philosophy courses, never mind what actually made any sense.

Multiply this several thousand times and you will see what an uphill fight it is to bring some economic (and, in particular, public finance) sanity to college students across the land!