Life's Other Laffer Curves

By: S. Leon Felkins

(This is a revision, written on 6/5/06, of the original essay written in 1990.)


"All extremes are error. The reverse of error is not truth, but error still. Truth lies between extremes." -- Cecil

A year or so ago while on a short trip by auto, I decided to tune in to ole' Rush Limbaugh just to hear his latest rants. Turns out he was blowing off about an issue that I heard him rant about many times before; his disgust with moderation and those who practise it, the "middle-of-the-roaders". It seems that Rush finds those who think that life is best lived "somewhere in the middle" -- and certainly not at the extremes -- to be despicable. Maybe even worse than one of the extremes, the "bed-wetting" liberal.

While his view may or may not be justified in the "left vs right" politics arena, I would bet that Rush does not apply this principle to the rest of his life.

So, I sent him an email in which I made the following points:

Dear Rush:
1. How do you like your steak -- raw or burnt to a crisp? Or somewhere in between?
2. How much sleep do you like -- 24 hrs a day or 0 hrs per day? Or somewhere in between?
3. How much should we help the poor and ill -- none or treatment as good as a king? Or somewhere in between?
4. How should children be disciplined -- No punishment or beat them to a pulp? Or somewhere in between?
5. How much government should we have -- None or Totalitarian? Or somewhere in between?
6. What kind of armament should citizens be allowed to have -- None or nuclear weapons? Or somewhere in between?
7. How much sexual activity do you like -- None or continuous? Or somewhere in between?
8. How do define a "speedy trial", guaranteed by the Constitution -- Within the next 24 hours or the next century? Or somewhere in between?
9. How much do you tip -- Zero or a week's salary? Or somewhere in between?
10. How many hours per day would you like to preach on you talk show -- Zero or 24 hours? Or somewhere in between? 11. How much sexual activity would you prefer: none or continuous? Or somewhere in between?
12. How many aspirins should you take for your headache: none or the whole bottle? Or somewhere in between? [Whoops, I'm in no way suggesting that you are a moderate on taking drugs.]
Sadly, I never heard back from Rush, so I will never know if he is a "middle-of-the-roader" on these and thousands of other daily life issues.

The point that I was trying to make with Limbaugh is that for almost all of life's problems and processes, there are choices that are nearly always better than the choices at either extreme -- just as Dr. Laffer has shown with his famous "Laffer Curve".

Most of you are likely familiar with the concept promoted by Dr. Laffer with regard to the relation between income received by the government and its rate of taxation. Basically, the "Laffer" principle is that since zero tax rate would give zero income and 100% tax rate would also give zero income (imagine a parasite sucking all the blood from a host - the host couldn't survive), there must be at least one tax rate somewhere in between that is optimum and a range that is better than at the extremes. A reasonable assumption is that the curve would have a shape roughly as follows (although, it is important to recognize that the point of the maximum is not generally known):

              |   
              |          **
              |        *    *
       Tax    |      *       *
     Revenue  |     *         *
              |    *            *
              |    *             *
              |  *                 *
              |________________________________
                       Tax Rate
                    

Figure 1 - The Laffer Curve

The intent of this essay is to demonstrate that the concept of the "Laffer" curve has extended application to other fields of human endeavor -- and especially -- to moral choices.

Is Such a Curve Applicable to Moral Choices?

"The general average of mankind are not only moderate in intellect, but also moderate in inclinations; they have no tastes or wishes strong enough to incline them to do anything unusual, and they consequently do not understand those who have, and class all such with the wild and intemperate who they are accustomed to look down upon." -- John Stuart Mill (1806-1873), On Liberty

J. S. Mill and a more recent political philosopher, Rush Limbaugh, would have you believe that moderation in action and beliefs is something to be despised. The situations I named to Limbaugh, outlined above, demonstrate that this is not so.

In fact, almost every activity that we can think of seems to have a preferred level somewhere between the two extremes -- just like the economic "Laffer curve" for taxation.

It seems obvious in examining a few simple cases then that the Laffer curve also applies to most - if not all - moral issues, as well as other choices of life, when looked at in a utilitarian point of view. The following examples provide further confirmation:

The Necessity of Vagueness

"Every nation, in every region, now has a decision to make. Either you are with us, or you are with the terrorists." -- President George W. Bush, September 20, 2001
Since it seems that taking extreme positions is not very desirable, that means that some arbitrary point between the two extremes must be chosen. This brings up the problem of vagueness which I discuss in another essay, " Dilemmas of Ambiguity and Vagueness". Vagueness creates very serious problems for both politicians and religious leaders who tend to be dogmatic and who try to create definitive laws and rules.

Characteristics of the General Laffer Curve

"It is by now well understood that a successful system must trade off decision quality for deliberation cost." -- "Approximate Reasoning Using Anytime Algorithms" - Zilberstein, Russell (1995)

Unlike the typical graph of the Laffer Curve as it is defined for the maximization of tax revenue (see The Laffer Curve: Past, Present, and Future), the Curve for life's other activities, in general, I believe is broad and wide. There are a couple of reasons why this is the most likely case.

One, there is what appears to be a fundamental law of nature, the problem of "unintended consequences" (A great book on this subject is Why Things Bite Back: Technology and the Revenge of Unintended Consequences by Edward Tenner). For almost every endeavor with have consequences that are opposite or at least detract from the intended results. In fact, in many cases, the unintended consequences may exceed the intended results!

A great example is the so-called "War on Poverty". Let us assume for the moment that the politicians that initiated this "war" actually intended to reduce poverty -- which may not be true at all as most of us would conclude now. However, the politicians found to their dismay (maybe, who knows) that the actual amount of poverty increased as a result of these tremendously expensive efforts. One major reason why this monstrous unintended consequence came to be was that when you give people, that seem to need help, handouts you give them a great incentive to appear to be poor and in particular to not try to correct their poor condition.

The second reason why the curve is likely to be broad in nature is due to the complexity of most of life's activities and problems. The best I can do to make my point is to give a couple of related examples.

Another characteristic of the Laffer Curve is that it could have more than one peak. I understand that marketing of software could have at least two maximums for profit return. You could set the price high, like say the price for Adobe's Photoshop, and make a nice profit just by selling relatively few. Or you could go low and hope to sell millions and only make a buck or two off of each. The price is quite arbitrary, for the CDs that contain the software really only cost a few pennies each to produce.

How to determine that a given process might have more than one peak is beyond the scope of this article -- or my abilities.

But let us get back to the more basic conclusions that come from the realization that decisions should in general not be at the extremes.

What are the implications?

[Virtually all problems presented to problem solvers are, from the outset,] … "best regarded as ill structured problems. They become well structured problems only in the process of being prepared for the problem solvers. It is not exaggerating much to say that there are no well structured problems, only ill-structured problems that have been formalized for problem solvers." -- Simon, Herbert A. 1973. “The Structure of Ill-Structured Problems,” Artificial Intelligence 4: 181-201.
There are serious implications to the realization that for any activity, taking an extreme position is not desirable.

The immediate conclusion that one must come to when faced with this situation is that concepts of "right" and "wrong" or "good" and "bad" are meaningless, as many have already concluded for other reasons. They are meaningless because they assume a bipolar relationship: "good" is on one end and "bad" is on the other end. That is rarely true, if ever. The best is somewhere in the middle and since there will always be some judgement involved, the location of the best is likely not well known or agreed to. (Mark up one for the Catholic Church - they have always taught that "moderation" was the proper approach to life. Even more profound and clearly expressed is the Eastern philosophy of the "Middle Way".)

Consider the issue of "child abuse". Most would quickly proclaim that they are against child abuse. But the issue is not so clear. What may be child abuse to you may be deserved punishment in another's view. The issue gets really messy when you try to impose some sort of law. At the low end of the curve would be "no one can ever inflict any physical pain on a child". At the other end of the curve would be to allow anyone to beat a child at their pleasure. I am opposed to both of those extreme positions. So when you and I are trying to determine who is the most "moral" we have a problem in first agreeing where the maximum of the curve is and secondly determining where our particular attitude is located on the curve.

Interestingly, if the curve has a maximum there are at least two positions on the curve that would have the same value. A simple example should illustrate this: what speed limit is optimum? Near zero speed is obviously too costly for the economy and with a small amount of reflection it is obvious that unrestrained speed would also be very costly. Somewhere in between is best and lets say for argument, the true maximum is at 70 miles per hour for open highways. It is obvious that on each side of 70 there will be points that match in value. For example, 40 and 120 MPH might have the same total value/cost to our economy and society. If I advocate 40 and you advocate 120 we are both promoting the same end result even though you may try to paint me as an extreme conservative and I may call you an irresponsible liberal!

The most fundamental conclusion is that the most "immoral" attitude of all is either extreme!

In Conclusion, Some Ramifications:

"Doubt is not a pleasant condition, but certainty is absurd." -- Voltaire

My Web page on Political Philosophy.