Someone must pay

"For every winner, there has to be corresponding losers, and it has
nothing to do with skill, ‘investing’ or how popular you are."
Neil Collins, The Daily Telegraph, 21 April 2003

Like many opponents of the "something-for-nothing culture", Neil
Collins does not just believe that if something good is done someone has to
pay; he seems to regard it as a moral imperative that someone does. So irritated
is he in his attack on the British Chancellor of the Exchequer, Gordon Brown,
from which the quote above comes, that he finds himself insisting that there
have to be multiple losers for a single winner, getting his grammar garbled
in the process. (If it’s a sub editor’s error it still seems to capture his
mood accurately.)

The object of Collins’s wrath is a scheme where the British government will
pay a lump sum into an investment fund for every child when it is born. The
government may add to it at future birthdays and relatives may also contribute
up to £1,000 per year. Babies from poor families will receive more from
the government than their better-off peers.

The thinking behind the scheme is that a little capital at the start of adult
life can make a big difference between success and failure. The middle classes
usually get a helping hand from their parents to enable them to "set themselves
up" but the poor don’t get the same advantages. The so-called "baby
bonds" scheme seeks to partially redress this imbalance.

Skeptics have much to doubt in the scheme, not least the paltry sums involved
– no more than £500 initially from the government, which is hardly going
to force open many doors for an eighteen year old. But what seems to irritate
Collins the most is his conviction that even if it makes some people better
off, someone will have to pay for all this. That means on balance it’s going
to be no help – what the government dishes out with one hand it will have to
take back with another.

But is it true that for every winner, there has to be a corresponding loser?
Whichever way you interpret this supposed piece of common sense, it doesn’t
seem so.

Could it mean that the total amount of wealth in a society must always remain
the same, so any increase in one person’s wealth must lead to a decrease in
someone else’s? Evidently not, since the world has got richer. It’s easy to
see how: finding more resources or using them more productively increases wealth.
So a primitive society that only produces food and bricks (and whose wealth
can only be measured in these commodities), gets richer if it learns how to
grow food and make bricks more productively. Bigger houses, more food, and no

Could it mean that any increase in government spending has to be matched by
an increase in taxation? Not necessarily. All that is needed to fuel higher
government spending is a higher tax yield. If the economy grows faster than
inflation, tax rates can remain the same and government spending can increase
in real terms, since there is a bigger fiscal pie for the government to take
a proportionately identical slice out of. This is why, counter-intuitively,
sometimes decreasing tax rates can lead to an increase in the overall tax yield.

Could it mean, more vaguely, that if someone benefits someone else must pay
in some way, even if these benefits and payments are not strictly financial?
Again, there’s no reason to think so. There may be ways, for example, to help
convicted criminals reassimilate into society, and since criminals cost the
taxpayer whereas working people contribute to national wealth, such a scheme
would benefit criminal, taxpayers and society alike.

The principle that for every winner, there has to be a corresponding loser
just doesn’t seem to hold. Contrary to what Collins says, there are such things
as win-win situations. Social cooperation as a whole is an example of this.
We can all win by refraining from acts such as theft and violence, for example,
since if we all (or most of us) do that we all enjoy greater security and don’t
have to use precious resources making ourselves safe from attack.

Baby bonds may turn out to be a bad idea, just as schemes that aim to stop
criminals re-offending often don’t work. But neither failure would be proof
of any general principle that any benefit has an equal and opposite harm. It
may be prudent to always ask if anyone stands to lose from an apparent win-win
situation, but that does not mean some things can’t make us all better off.

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