Friday, February 06, 2009

Efficiency vs. Well-being

Should society be primarily an efficient arrangement or should it aim to promote the well-being of its members? If it's efficiency you favor, then go ahead, lay off as many workers as you wish so long as you can still provide the goods and services demanded by paying consumers. However, if it's the general welfare you're concerned with, get ready to accept some inefficiencies.

This is the fundamental debate underlying key policy decisions: Should we stimulate the economy? Should we subsidize arts, education or public transportation? Should we spend resource on people unlikely to produce something of equivalent value?

I'd argue that, at heart, human beings are fundamentally inefficient. Let's do the return on investment (ROI) math.
  1. Most human beings take about 22-23 years of utter subsidization -- infancy, parenting and schooling -- at a cost of $125,000 to $250,000, depending on household income level, not counting college.
  2.  Add college: from about $40,000 to $200,000 for a 4-year undergraduate degree.
  3. So society has invested between $125,000 and $450,000 on each person before they have produced a single widget or service of any economic value.
  4. Then, let's assume that for about 40-45 years this person works. 
  5. Subtract from this person's income his or her living expenses, then ask, at age 65, has society recovered $125,000-$450,000, adjusted for inflation?
  6. Wait! From age 65 to whatever (100?), as a norm human beings go back to being non-productive resource consumers; in most cases, they end up being subsidized by someone else. So subtract what is spent in those years. Do we still have a profitable ROI?
So, you see, human beings are inherently inefficient. Let's get rid of them, shall we?
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