Note: this section will be revised from time to time!
What is considered to be adequate is purely arbitrary and varies greatly among the citizens. What is worse, the level of government services provided is primarily driven by the government -- not the citizens -- anyway.
Now, you may have just assumed that there was some kind of definite, clear cut, level at which a species becomes endangered. Think again! The assessment that a species is endangered is purely arbitrary! The only think that is absolute is extinct.
The Federal income tax rate structure in which the marginal rate varies with income is, of course, purely arbitrary. How much members of our society who have different income tax levels should pay is an arbitrary judgment that is difficult to defend in principle and impossible to defend in the specific details.
The amount spent on defence varies greatly between countries, varying from practically nothing to the nearly 300 thousand million dollars spent annually by the U.S.A.. The level chosen is driven by the selfish interests of the defence industry and the government agencies involved.
Assuming a minimum wage is necessary or beneficial (a questionable assumption), what should it be? $5.63 per hour? Why not a penny more? And so on? How is any particular level justified?
At what level of intelligence do you become an intellectual? I certainly haven't a clue but if you think you do, how about dropping me a line. But since it is a vague term, I believe I can prove that both you and I are intellectuals and that makes me feel good!
Decisions on purchases is a particularly difficult subject for individuals. A significant part of the problem is a result of vagueness issues, which I will call The Spending Dilemma.
It seems reasonable to conclude that purchases below some value will have no significant impact on a families finances. For most of us a purchase of two or three hundred dollars could impact our financial situation for a month or two, while a purchase of two or three dollars is not likely to be noticeable. While any amount, even a penny, takes away from what can be spent on other purchases, the cutoff between comfort and disaster is not abrupt but spread out substantially. So, it certainly seems reasonable that below some value, we should not give the purchase any thought.
If you still doubt, think about this: what if a penny was consumed by the washing machine -- could you detect it by measuring the financial welfare for that month? Is the only way to know that a penny is missing is to do a detailed accounting of income and expenditures and otherwise it is undetectable? Well, if you admit that is true for a penny, you have to concede any other larger amount because we can increment to any amount by adding a penny at a time.
Now let us consider a common practice of business in which a "volume discount" is given. Let us say that you can subscribe to channels on your cable TV for one dollar a channel. Let us further say that one dollar is below the level of "significant impact" for your financial situation. The cable TV folks have a special deal: you can purchase 100 channels for only $50. Now $50 is above your "significant impact" level and you and your wife agree that it is more than you can afford. So you buy only 20 channels for $20.
Would you consider buying another channel for one more dollar? After all, we agreed that one dollar is insignificant. If you agree that it would be alright to do so, then we have a problem. There is no reason to object for any number, purchased one at a time, for even a hundred channels but we did have reason to object to buying 100 channels for $50!
Let us now say that you have purchased 49 channels for $49. What is the incremental cost of buying one more channel? Well, you can't buy one more channel (we will assume that the vendor automatically switches you to the "100 for $50" deal even if you are not cleaver enough to do so). But you can buy 51 channels for one dollar! Certainly if 49 channels were worth $49, then 51 ought to be worth $1. At 48 channels you have a similar situation. There you can buy 52 channels for $2. Still a good deal. Continuing back, we look at the situation where you have 25 channels. There you can buy 75 channels for 25 dollars, a cost of 33 cents per channel. Certainly if you can justify buying 25 channels at $25 dollars, you can buy 75 channels for $25.
But let us get back to the basic case of deciding on incremental costs. The issue boils down to is there "one more straw that breaks the camel's back?". Even if you feel that a $50 purchase is too much for your budget, is that equivalent to having already spent $49 dollars and now deciding whether one more dollar can be spent. I think not and therein lies a paradox. It seems obvious to me that this problem is just another instance of the "Voter's Paradox" model, which you may want to look at.
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