"Public" employees

Here’s my example. You and I are going for a drink. For simplicity, suppose all drinks cost the same price. If we both choose our own drinks, we will both end up with the drink we want, say lager. But if I take your money from you and buy the drink I think you should have, there are two possibilities: I might buy you lager, in which case the end result is the same, or I might buy you something different, e.g. cider. If I bought you cider, then you have suffered a loss in utility ex ante because by definition we choose what we value highest (i.e. what we expect to get the most utility from).

So whether any particular public employee lowers utility and by how much depends on what people would have chosen if they had the choice to spend their money as the wished (rather than having them taxed away from them). Of course, they didn’t have a choice, so we cannot possibly know what they would have chosen. It’s really all guesswork…

You may be interested in my powerpoint presentation based on Hazlitt’s book: Economics in One Lesson: Wars, Governments, Price Controls and the Boom-Bust Cycle.