What's Wrong with a Law Against Burning Money?

Have you ever seen an entrepreneur take some cash out of his wallet and light it on fire? Though I definitely remember seeing such conflagrations in movies and television, I’ve never seen even a solitary dollar bill burn in real life.

Still, I have no doubt that someone somewhere has burned some money.

Imagine, then, that the government passes a law against the burning of money. (Technically, this law already exists, though it is unclear if anyone has ever actually been punished for burning their own money!) What, if anything, would be wrong with passing — and strictly enforcing — such a law?

If the law correctly identifies money, the direct effects are trivial because almost no one wants to burn their own money. The indirect effects, however, might still be onerous. Imagine if the Compliance Department of every business starts insisting that employees log the serial numbers for every cash transaction to ensure that no bill gets burnt.

The more serious harm comes, however, if the law incorrectly identifies money. Suppose, for example, that regulators rule that gasoline counts as “money.” A ban on an ultra-rare symbolic act morphs into a crypto-ban on fossil fuel, with dire consequences. Not only do you have to deal with the energy regs; to raise your voice in opposition, you must face the Kafkaesque rhetorical burden of arguing that gas isn’t “money.”

My point, of course, is not that existing laws against burning money are likely to become a major burden on industry. Slippery slopes exist, but this isn’t one of them. I do, however, claim that plenty of existing regulations closely resemble laws against burning money. Correctly applied, they are virtually harmless, because they forbid actions that businesses would almost never take. Since the laws are routinely incorrectly applied, such laws are a major and destructive burden.

Discrimination laws are the clearest example. Taken literally, discrimination laws normally just tell businesses, “You’ll hire the best person for the job, if you know what’s good for you.” Which is exactly what businesses would do if they wanted to make as much money as possible.

Why then are discrimination laws so controversial — and compliance so onerous? Because discrimination laws routinely incorrectly identify discrimination. In the truest of meritocracies, large group disparities abound. Why? Because humans’ interests and aptitudes vary widely! Just look at the distribution of Wikipedia volunteers to see how widely. Discrimination laws are burdensome because enforcers willfully ignore these truisms — and therefore see presumptive discrimination everywhere.

Much the same holds whenever regulators require businesses to serve all willing customers. Insurance is a common case: If you want to sell insurance in our state, you have to sell it to everyone. If this regulation is enforced literally, the profit-maximizing response is just, “No problem! For every consumer, there is a price at which I am delighted to serve him.” In practice, however, regulators normally combine “Sell to everyone” with “… at prices we deem suitable.” Which understandably dulls firms’ appetite for making their market as big as possible.

Why, you may gasp in exasperation, can’t regulators just be honest? If they want hiring quotas, why don’t they just openly admit, “We. Want. Hiring. Quotas”? Why do they find it necessary to libel and slander employers as vile racists and sexists? If they want to force insurers to sell their products at a loss, why don’t they just proclaim, “We want low-risk drivers to subsidize high-risk drivers”?

The answer is that honesty and power-hunger conflict. Demagogues rule the world. What is demagoguery? Telling voters what they want to hear regardless of its truth. And one of the main things that voters love to hear is that the targets of the governments’ wrath are villains who deserve to suffer. When this is false — as it usually is — pragmatic politicians lie through their teeth. If voters were rational, they’d furrow their brows and say, “What’s the point of a law against burning money?” But most voters aren’t rational. Indeed, they’re so irrational that — until today — you probably never before even heard the question, “What’s the point of a law against burning money?”