"It profits me but little that a vigilant authority always protects the tranquillity of my pleasures and constantly averts all dangers from my path, without my care or concern, if this same authority is the absolute master of my liberty and my life."

--Alexis de Tocqueville, Democracy in America

Wednesday, November 17, 2010

BankruptingAmerica Parody Video

A website I'd never heard of called BankruptingAmerica has a new video up that addresses (in a very funny way) the uncertainty American businesses face from the Obama administration on taxes, healthcare and regulations:

Very funny stuff.  Good work by these folks, and an example of how the Internet gets used by smart people to get out messages that, ten or twenty years ago, would have been impossible to find in the media.  

The issue the video addresses is actually very simple, and a matter of the most basic economics, which is really just the science of human choice in a world of uncertainty (per von Mises). People will risk uncertain outcomes in the hope of gaining rewards commensurate with the risk if the rules of the game are knowable and fixed, i.e., if they can control at least some of the uncertainty.

For instance, I will play Texas Hold-’Em even though I can’t know what my opponents have. If two Aces are on the Board and I have an Ace-Queen in the hole, I can get beat if my opponent has an Ace-King in the hole under the rules of the game, and I know that, but I will still be willing to bet, because I have a good hand.   If I lose, so be it.  But if my opponent (call him “Government Man”) has Seven-Deuce in the hole, but can redefine the rules midstream and say that sevens and deuces are wild, so he actually has four aces… well, then, knowing that he has the power to change the rules, I am going to be unwilling to bet. In fact, I might just take my money and go home.

Which is exactly what is happening right now with investors. The government reserve the right to change the rules of the game next year on taxes, health care benefits, and the environment. So why should an entrepreneur want to play the game?

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