Debt and Subjective Value Preference

Enough has been said about the core issue of the blogosphere's recent debt discussion. I have left a few comments around, most notably at Robert Murphy's and Steven Landsburg's blogs. Other than that, I don't have much to say about the core issue.

However, something Steven Landsburg wrote got me thinking about a tangential issue, namely, whether or not a person can benefit from something to which they are morally opposed. Here is Landsburg talking about benefits:
Therefore nobody currently alive (or, in Bob Murphy’s Abraham-and-Isaac model, no member of the older generation) has any reason to object to deficit financing. Deficit financing expands your opportunity set, which you cannot be a bad thing (for you). [sic]

Here are a couple of scenarios:
  1. Let's say someone offered to give you a million dollars. Great news, right? You'd take the money, right? 
  2. What if the person making the offer was the kingpin of the local mafia? Would you still take the money? 
Now, subjective value preference implies that there are people who would definitely answer yes to both questions. There are also people who would definitely answer no to both questions. I would guess that the majority of people would answer yes to question #1 and no to question #2.

That majority of people demonstrate why Steven Landsburg is wrong when he says "Deficit financing expands your opportunity set, which [ ] cannot be a bad thing (for you)."

What I mean is, there are plenty of us who feel funny about getting a government handout or passing debt on to others for mere personal gain; just as there are plenty of us who feel funny about getting a free million-dollar prize from the mob.

Landsburg assumes that the "benefits" offered by deficit spending are unequivocal benefits to anyone in the country. Really, what he is assuming is that we all value these kinds of "benefits" exactly the same way he does.

But the truth is, many of us value such benefits differently. This is because we all value everything a little bit differently from everyone else. Not only is it possible for people to value certain "benefits" negatively, it is entirely expected (unless we are talking about "pleasure, as an abstract concept" or something).


  1. In other words, you've missed the point completely.

    If I force you to take a million dollars, can that
    make you worse off? Sure, because you might feel
    squeamish about it.

    But if I offer you a million dollars that you
    can *take or leave*, you can't be made worse
    off, because you can always turn it down.

  2. If that were true of government debt, then I might agree. Unfortunately, there is no way for me to "leave" government debt. It's an offer I can't refuse, hence my analogy to the mob. The government engages in deficit finance regardless of my own personal wishes. The "offer" makes me worse off, unless I happen to decide to change my ideology.