Our nation is rapidly approaching a point from which there's little chance to avoid a financial collapse. The heart of our problem can be seen as a tragedy of the commons. That's a set of circumstances when something is commonly owned and individuals acting rationally in their own self-interest produce a set of results that's inimical to everyone's long-term interest. Let's look at an example of the tragedy of the commons phenomenon and then apply it to our national problem.
Imagine there are 100 cattlemen all having an equal right to graze their herds on 1,000 acres of commonly owned grassland. The rational self-interested response of each cattleman is to have the largest herd that he can afford. Each cattleman pursing similar self-interests will produce results not in any of the cattlemen's long-term interest -- overgrazing, soil erosion and destruction of the land's usefulness. Even if they all recognize the dangers, does it pay for any one cattleman to cut the size of his herd? The short answer is no because he would bear the cost of having a smaller herd while the other cattlemen gain at his expense. In the long term, they all lose because the land will be overgrazed and made useless.
We can think of the federal budget as a commons to which each of our 535 congressmen and the president have access. Like the cattlemen, each congressman and the president want to get as much out of the federal budget as possible for their constituents. Political success depends upon "bringing home the bacon." Spending is popular, but taxes to finance the spending are not. The tendency is for spending to rise and its financing to be concealed through borrowing and inflation.CONTINUE READING