Santa Claus and the Welfare State

Every year at around Christmas time there are numerous opportunities to donate toys or other gifts to charity. The idea is that there are many kids out there who, absent these charitably donated toys, would be getting nothing on Christmas morning. I'm a big supporter of this effort and I think that even though buying a toy to donate is, for most of us, no great hardship whatsoever, it can have a big impact on some child's holiday. I have very fond memories of my childhood Christmases. I couldn't imagine what it would have been like to not have gotten any gifts on Christmas morning.

My own kids are now 6 and 8 years old. As a family, we have donated to the gift drive at our church for the past several years. My kids enjoy being involved in this act of charity. They help to choose the gifts based on the profiles of the children we have selected and they usually help to wrap the gifts as well. In the beginning they just went along with the program and didn't think too much about it. They just knew that we were buying a gift for a 5 year old boy or a 6 year old girl and they didn't think much beyond whether the child would like the toy we bought.

Last year, though, they seemed to think a little more deeply about what we were doing and why we were doing it. One of my kids asked "Why do we have to donate gifts? Aren't these children going to get gifts from Santa?"

On the surface this is a very logical question, and it seems simple enough, but when you consider that my kids still believe in Santa, you realize this isn't really that simple of a question. The challenge is in answering it in such a way that still preserves the illusion that Santa exists but also makes the point that it is still important for us to donate these gifts to help children who are less fortunate.

The answer that my wife and I gave was to remind our kids that each year they get a couple of gifts from Santa, but they also get gifts from their parents, grandparents, aunts and uncles, cousins, and family friends. The gifts we would be donating would supplement the gifts that those kids would, of course, still be getting from Santa. Essentially the donated gifts would take the place of the gifts from the parents or other family members who can't afford to buy gifts this year. My kids took this answer at face value and didn't ask any follow-up questions or probe any further. Whew!

I was recently thinking about this question again and realized that in some ways it actually reveals a lot about our society. Here's an interesting thought question: what if Santa really did exist? How do you think that would affect people's charitable giving during the Christmas season?

Let's suppose that Santa really does exist. What if children all over the world just automatically got gifts on Christmas morning without any parental involvement whatsoever? How would that change our attitudes toward the donating of gifts to charity? I don't think it would be a stretch to say that charitable donations would decrease substantially because if the kids are getting gifts from Santa, they obviously don't need any donated toys. The main motivation for most people to donate toys at Christmas is because we KNOW there is no Santa Claus and there would be some kids who would not be getting anything if we didn't donate some toys. Sure, there would still be some people out there who would donate toys even if Santa did exist, but I think there would far fewer of them. The whole motivation behind the act of charity goes away when the toys from the North Pole really do magically show up on Christmas morning.

So, I think we could draw a lot of parallels between Santa Claus and the welfare state. With the one notable exception in that Santa doesn't need to seize money from the citizens under threat of jail or worse in order to fund his gift-giving. (You could argue that the elves are actually slave labor, but that's a topic for another post...)

So, what are the similarities? Here are some that come to mind:

• Both Santa and the welfare state are impersonal. Nobody actually interacts with Santa, the whole reason he delivers his gifts in the middle of the night is to avoid contact. The government agencies are similarly faceless. Some unemployment agencies allow recipients to fill out applications online - no need to even talk to a person.
• The gifts don't "cost" anything. Christmas toys just somehow materialize at the North Pole (I know the elves supposedly build them - but where do they get the wood, paint, etc..?) Santa's gifts are unlike other gifts because there is no implied sacrifice on part of the gift giver in order to provide you with the gift. If Aunt Ethel gives you a pair of socks, you at least know that she had to pay for them. There was some sacrifice on her part in terms of money and time. Like gifts from Santa, welfare benefits just come from the government - they just somehow materialize. It's not clear who had to sacrifice to pay for them. Taxpayers are like Santa's elves - just nameless slaves.
• You don't actually have to do anything to earn your gift. Santa merely applies some arbitrary judgement of naughty or nice, but otherwise pretty much everyone gets something. Government benefits are similarly automatic - just being above a certain age qualifies you for SS or Medicare. Just lose your job and you qualify for unemployment benefits.
• They both create a sense of entitlement. Children expect their gifts from Santa each year - despite the occasional parental threat of telling Santa to put them on the naughty list. People similarly feel entitled to "their" government benefits. They are often spoken of as a "right".

Think about it. One of the primary arguments in favor of social welfare programs is that if the State were not there to take care of these people, nobody else will. I don't believe that's true at all. The Christmas "Toys for Tots" phenomenon provides a concrete example of how people feel compelled to help others out when they know there is no Santa. In much the same way that Santa, if he existed, would crowd out private charity, state-sponsored welfare currently crowds out private charity. We could call this the Santa Claus effect.

Imagine if we lived in a country with no state-sponsored welfare (and you don't have to go back very far into American history to find a time when this was the case). Would there indeed be thousands of people starving to death and dying for lack of medical care? I doubt it. Granted we could not now just pull the plug on these programs because there are large numbers of people who have been taught by the government to be dependent on these programs, but we need to stop making more people so dependent. Any transition away from the welfare state would have to be gradual enough to not leave those who are dependent out in the dark. But it can be done. Allowing young people to opt out of Social Security and Medicare would be a start.

I'm convinced that in the absence of welfare entitlements, two things would happen:

• People would become more self-reliant. When Santa isn't there to bring toys, the parents make sure to take care of their own kids. Similarly if the people knew that there would be no Social Security to pay for their retirements, they would save more on their own.
• Private charities would step in to help those who, for some reason, needed help. I think it is important to note that the number of people needing such help would be far fewer than those who receive benefits today - see above. Like the thousands of people who buy toys at Christmastime for children who would otherwise be getting nothing, people would help those in their community who needed help.

So, as much as I like Santa, I know in my heart that we don't need him. And, as a matter of fact, we are much better off without him.

...but not just any economics.

I should have been a little more specific in my last post. I said that it is important to have an understanding of economics and that's true, but there are a number of different schools of economic thought out there. I'm specifically referring to the Austrian school of economics.

What is the Austrian school of economics?
My cop-out response is to link you to Tom Woods' resource page on the topic. The overview articles (Here and Here) that he references at the top of the page are indeed good for some background. There is absolutely a TON of information on Tom's page and he has it organized quite well. In subsequent posts to this blog I intend to highlight some specific books, articles and other media that I have personally read and which I would recommend. Since Tom did such a great job with his page, I'll take advantage of the division of labor and let others do what they can do better than I can and I will instead focus on what I think I can uniquely contribute.

I just think the Austrian school makes a lot of sense. I'm not an economist, but the overall theory as articulated by the Austrians makes a lot of sense to me. The really cool thing about the Austrian view is that it is understandable to the average lay person and you don't have to suspend your entire sense of logic in order to believe the theories and conclusions. (For instance you don't have to forget everything you know about personal finance in order to believe that if you have a debt problem the way to fix it is to go even deeper into debt - which is what the non-Austrians will tell you)

Although I am biased toward the Austrian view, I do think it is important to be exposed to alternate points of view. Unfortunately you don't really have to go too far out of your way to be exposed to these non-Austrian economic points of view. The dominant non-Austrian school (and probably the most "anti-Austrian") is the Keynesian school. This is named after John Maynard Keynes, who was a British economist whose theories became popular in the 1930's and are still quite popular today. The current economic policies in the USA are highly influenced by Keynesian theory. Most of the mainstream media is also heavily influenced by Keynesianism (Paul Krugman of the NY Times is an avowed Keynesian). It's OK to read Krugman or any other popular economics articles or books. Once you have learned a little bit about the Austrian school, you'll never be able to look at non-Austrian economics the same way again. And in my book, that would be a good thing...

It starts with economics

As this blog is about discovering liberty, or freedom, the one thing I've learned in the past couple of years is that the essential foundation for understanding the principles of freedom is an understanding of the principles of economics.

Why is it important to understand economics in order to fully understand the principles of liberty? Well, quite frankly, our daily lives involve many economic decisions. There is no way around it. If you really think about it virtually everything you do has an economic impact and economic considerations guide your actions. You might not think about it in quite that way, however.

Most of us go to work each day. There's an obvious economic impact to that action. Along the way, we might make a decision about which gas station to patronize in order to fill our tanks. We could choose the one that is conveniently located along our commuting route, or we could choose to go a little bit out of the way to stop at the station that we know is a little bit cheaper. It depends on what it more important to us at the time. How low is the tank? How soon do we need to be at work? What is the traffic like today? Sometimes the convenience of the station along the way outweighs the savings to be found by going to the out-of-the-way station. That is just one example of the many decisions each of us makes each day regardless of our occupations. The price of the gas is a factor in our decision making, but not the only factor.

The accumulation of these individual economic decisions that each of us makes each day constitutes the general "economy" that we hear about on the news and that we talk to each other about. The economy is not some separate entity out there with its own free will. It's us.

But for some reason when we think about the economy, we tend to forget that it is really just us. By conceiving of the economy as some singular type of entity, we start to think of it as something whose behavior can be predicted or, even worse, controlled.

The economy can only be controlled in so far as each individual person can be controlled when making the numerous economic decisions they make each day. Now we do know that there are some general things that can influence an individual person's behavior, but we cannot claim to predict exactly what any individual will do in a particular situation. Most of us would choose the gas station with the lower prices, but we won't all make that choice all the time. Thus we cannot predict with certainty exactly what an accumulation of many people will do. Spill some water on a table and you can influence it to flow in a certain general direction by raising one end of the table, but you cannot predict, or control, exactly where it will all flow.

So, what does this have to do with freedom? Well, if the desire is to "control" the economy, then the individual actors within the economy must be controlled. Merely "influencing" them will not achieve the end of control of the overall economy because their actions will still be unpredictable. Control in this sense implies the removal of voluntary action. Now that's where the freedom part comes in. How can an individual person be said to be free if he is being forced into the course of action that the economic controllers want him to take?

The simple truth is that the person is no longer free in this case. Economic freedom is a prerequisite for political or social freedom. So, if the goal is to have political or social freedom, we must first ensure our economic freedom.

Now, here is where the understanding of economics comes in. If you don't understand the principles of economics you cannot defend your economic freedom from those who aim to control the economy and, by extension, you.

Great minds think alike...

So, I watched this video the other day and it struck me that Lew Rockwell touches on exactly what the purpose of this blog is.
In my "About this blog" page I talk about how I think that America, as a whole, has forgotten what liberty means - mainly because so many of us have never really experienced it. We're so conditioned now to having the government involved in every aspect of our lives that it seems inconceivable to imagine life without our wise overlords looking out for us.
At the beginning of his speech, Lew says "the more liberty we lose, the less people are able to imagine how liberty might work". I couldn't have said it better myself.