The government has been criticised for triggering panic buying of petrol. What’s not been pointed out is that its mistake here is not an isolated one, but is in fact a common theme of some of its major policies.
Cameron said yesterday:
If there is an opportunity to top up your tank if a strike is potentially on the way, then it is a sensible thing if you are able to do that.
Topping up your tank is indeed sensible for any particular individual. But if everyone tries to do so, the result is chaos and petrol shortages.
What we have here, then, is an example of behaviour that is individually sensible but collectively self-defeating.
Cameron’s advice thus represents a form of the fallacy of composition. He fails to see that what’s rational for an individual might not benefit all individuals.
And as I say, this is not an isolated error. Take these examples.
1. Maria Miller, a minister at the DWP has said that there is a “lack of an appetite for some…jobs that are available.”. Let’s grant - heroically - that this is the case, and that she gets her way and the unemployed step up their job search. Some will find work. But in doing so, they’ll merely get those jobs at the expense of other job-seekers; remember, there are around six unemployed for every vacancy. More intensive job search is rational for an individual - it increases their chances of getting work - but it isn’t aggregatively beneficial, as it merely increases others’ frustration.
2. The government has reformed benefits to “make work pay”. This represents the same error Ms Miller makes. If one individual tries harder to get work, he might well succeed. But if all do, they don’t*
3. The presumption that laid-off public sector workers can be rehired by the private sector might be true if you look at any particular individual public sector worker who can apply her skills elsewhere and take advantage of the vacancies that arise from the natural churn of the labour market. But it’s much less likely if tens of thousands of such workers chase similar and limited private sector vacancies.
Social behaviour, then, is not simply individual behaviour writ large. In failing to see this yesterday, Cameron was repeating a consistent error of his government.
But why is? One possibility is that Tories believe in the most debased form of free market thinking - that what’s good for the individual must always be socially optimal. Another possibility is that they just lack any feel for the social sciences, a large chunk of which is devoted to prisoners’ dilemma-type problems where individual and collective goals conflict.
Whatever the explanation, the fact is that Cameron’s remarks yesterday were not “misspeaking”, but rather indicative of his government’s failure of thinking.
* You might reply that the increased labour supply would force wages down and so create demand for workers. But even if this were true in theory, it is blocked by the minimum wage.