A couple days ago, I wrote that:
The problem with bonds (our standard method of issuing government debt) is that, with durations measured in years or even decades, they separate the act from the negative consequences by long enough to severely blur the link between them in many people’s minds. This is why debt has been considered a moral failing throughout much of human history.
When you look up the term “morality” in various dictionaries, you find a lot of definitions explaining that it’s a system of describing good and bad, right and wrong, etc. And that works well enough if you don’t look into it too closely, but once you do, there are some notable omissions in the standard idea. Why does no one ever define sticking your hand in a fire as a moral failing? Why do we never hear “thou shalt not run out into a busy street”? To do so would obviously be bad; it’s likely to cause great harm, either to you or to someone else as drivers take extreme actions to avoid hitting you.
But I think that that’s exactly why it’s not considered a moral issue: because it’s obviously a bad idea.
The law of cause and effect is one of the most fundamental principles in the world. Actions have consequences, for better and/or for worse, and all events arise from actions that caused them. The universality of this principle is why the colloquialism “for no reason” is commonly used to describe an event which we find incomprehensible: the literal meaning of “for no reason” is an effect with no cause, a thing which we instinctively understand to be impossible.
Little children, and even animals, develop a clear understanding of basic cause and effect remarkably quickly; it almost seems to be a rule written directly into our genes. We can even use cause and effect to reason about things that aren’t real. Today at work I was able to say, “the problem looks like X, but we know it isn’t actually X, because X causes Y and we’re not seeing Y.”
And this is all great, as far as it goes. Unfortunately, it doesn’t go all that far. As I said above, we seem to have an instinctual understanding of basic cause and effect. But when it goes beyond the basics, that’s when things get trickier.
Distant consequences
I know a man who’s in an assisted living environment today, painfully living out what few days remain allotted to him as he wastes away under the results of a smoking habit he kicked over thirty years ago. Just try to imagine that; the mind boggles! Stop doing something, think you’re fine, and then decades later the consequences pop up seemingly out of nowhere (there we are with another “effect with no cause” phrase) and kill you.
As a general rule, humans are pretty bad at seeing connections between distant things. But we’re also not stupid; we know that long-term links do exist. Conservatives believe in a God capable of
Declaring the end from the beginning, and from ancient times the things that are not yet done (Isaiah 46:10)
while more secular-minded people understand that when people see the same patterns of “person does X and then years later Y happens to them” repeat enough times, we start to grasp that there might be a link between them. Regardless of which interpretation you believe in for the origin, the result is the same: the idea starts to get around that certain things are bad to do, even though they cause desirable effects in the short term, because they cause serious problems further down the line.
We call this idea “a moral code.”
Turning long-term problems into short-term ones
Moral codes frequently come with laws and punishments attached, and this serves a very useful purpose: it converts a long-term, incomprehensible issue into a short-term one that’s easy to grasp. Instead of “it’s bad to steal because this can erode trust in society and end up promoting a culture where no one’s safe,” we get “it’s bad to steal because the police will throw you in jail for it.”
We even go one step further and promote the idea of a statute of limitations, saying that if a crime occurred and it isn’t prosecuted within a reasonable amount of time, the prosecution can’t happen at all. Despite how this might, on the surface, look like a way to help criminals get away with their wrongdoing, it’s actually quite the opposite: a way to ensure that they’re easier to convict by making sure that, if you want prosecution of somebody to happen, you’d better do it before so much time has gone by that the evidence just isn’t there anymore.
There’s a similar principle in computer engineering known as “fail fast,” the idea that the hardware or software should be designed such that when something goes wrong, it will crash very visibly and blow up right in the user’s face as quickly as possible. While this may seem like a bad idea at first glance, it achieves two desirable results. First, it keeps the problem from snowballing and causing other, bigger problems down the line, and second, it keeps the visible effect (the crash) as close to the cause as possible, which makes it significantly easier to diagnose and fix the cause.
Likewise in economics, there’s the idea that when an actor is insulated from having to face the direct consequences of their behavior, they are incentivized to take more and bigger risks, due to the understanding that someone else will end up cleaning up the problems for them. (cf. the way that unprecedented government intervention to arrest the 2008 financial crisis led directly to the reinflation of an even worse housing bubble that we’re just now starting to see finally burst.) The name of this concept? Moral hazard. The best way of dealing with moral hazard is to directly expose the actor to the consequences of their actions, and make sure that they’re aware of it. (Gordon Tullock’s steering wheel spike thought experiment is an interesting look at moral hazard as applied to ordinary people: if you understand that a wreck is likely to harm you personally, rather than that the safety features of your car will insulate you from harm, you’re more likely to drive carefully and avoid getting in wrecks. Any halfway intelligent person can come up with plenty of valid reasons why this is a terrible idea to take literally, but it illustrates the basic point quite well.)
Fixing the immoral national debt
Having established this, we can see why I say that the national debt is a moral failing — by using bonds to put off paying down the debt, and then rolling over the bonds that come due into new bonds, we end up never actually paying off the debt, and it just gets bigger and bigger and bigger — and my claim that the cure is to require overspending to inflict immediate pain on the economy through inflation.
Transforming long-term problems into short-term problems gives people strong incentives to fix those problems. When the current structure of things incentivizes immoral behavior, the best solution is to fix the structure, to replace the incentives with new ones that incentivize moral behavior instead.