Irrational Economic Behavior?

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Examples of irrational economic behavior provide unlimited opportunities for speculation and theorization by economists. For example, why do individuals borrow money from their credit cards at 19% while simultaneously receiving less than 4% on their savings account? Wouldn’t it make more sense to pay off the high-rate credit card balance with funds earning a lower rate? Clearly, something deeper than pure economic calculation drives these actions.

Even the richest among us act economically irrational at times. In recent days New York City Mayor Michael Bloomberg has been hinting that he will not only continue, but seriously ramp up, his personal record of mindless economic waste. In 2001 Bloomberg spent a staggering $74 million on his mayoral campaign. In 2005, apparently still unsatisfied with his name recognition garnered after his first term running Havana-on-the-Hudson, Bloomberg ponied up another $85 million to extend his tenure another four years. That amounts to almost $160 million to buy a job paying less than $200,000 per year. No one spends $160 million on something that returns roughly $1.6 million dollars over eight years unless something much deeper compels him.

While the number of billionaires is small, the number of billionaire fools is even smaller. Most of those who fall into this category inherited their wealth. Mayor Bloomberg, on the other hand, recognized a need, provided a solution, and reaped the requisite rewards. The odds of a fool repeating his success are miniscule. I should know, I have been trying for years. Michael Bloomberg is anything but a fool. And for that reason, taxpayers nation-wide should keep a wary eye on his presidential aspirations.

According to the New York Observer, Bloomberg is now considering spending up to $500 million to purchase the office of the president. In other words, by spending half a billion dollars, Bloomberg will secure himself total earnings of $3.2 million over eight years, assuming he decides to acquire a second term. This analysis ignores the fact that he might have to spend another half billion dollars on a second propaganda crusade, thereby halving the already negative return on investment.

Why would Bloomberg spend his money so irrationally? The trappings of the presidency would be lost on New York City’s chief plutocrat. His personal jet blows the doors off Air Force One. From the pictures I have seen, his house in Bermuda makes Camp David look like the government rest stop that it is. Gracie Mansion, New York City’s mayoral residence, has gone vacant since 2001 as Bloomberg opted to forego public housing and remain in his opulent 79th Street brownstone. Lacking Gracie Mansion’s waterfront location, the White House should be even less attractive to him. Lastly, Bloomberg ceremoniously rides the subway to work so the armor-plated, presidential limousine might find its rightful place at the Manheim auto auction.

If Bloomberg is apt to spend his own money so wastefully, imagine how much more recklessly he will fritter away yours. Rest assured that someone who squanders billions of his own dollars would happily blow trillions of your dollars without a second thought. None of the Republicrats currently running has shown such personal fiscal insanity. Unlike drunken sailors coming ashore with their pockets full of loot, our current crop of presidential pretenders at least understands that wasting other people’s money causes less personal distress than reaching into one’s own pocket.

Furthermore, consider the thought process behind his actions. Historically it tends to run along these lines: "If I were to snatch/commandeer/buy the chairmanship/Führer-ship/presidency, I could make the world a better place." Many mass graves, hastily dug trenches, and crematoria are littered with the bones and ashes of the victims of such utopian idolizers. Bloomberg’s electoral expenditures to date hint at his belief that the road to Utopia is paved with cancelled checks. Neither megalomania nor Bloomberg’s campaign spending recognizes any rational bounds.

Mark G. Brennan [send him email] writes from New York City. Listen to his podcast.

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