The idea that people are driven by fear of losses more than they are by the potential for gain has attained a sort of dogmatic adherence among behavioral economists. But there's a problem: the theory isn't true.
There is a growing drumbeat from some high-profile economists to reassure Americans that large increases in income and wealth taxes won’t distort labor markets. Yet much of their arguments are very misleading.
Market prices reveal critical information about sellers, buyers, and market demand. But government interference in markets substitutes a fake version of reality that leads to impoverishment.
The free-market doctrine does not rest on an assumption that consumers make wise choices. Like the mythical “economic man,” the Perfectly Wise Individual is a straw man created by the critics of the theory.
Recycling isn't free. It requires the use of time and resources, many of which end up wasted. But politicians keep insisting that recycling is always a win-win, even though we have many examples to the contrary.
Other psychic factors being equal, it is to everyone's self-interest to maximize his monetary income on the market. But this maximum income can then be used for either “selfish” or for “altruistic” ends.
People buy things that reflect their value systems — values learned in homes and other non-market institutions. Meanwhile, markets don't force anyone to buy anything.
