Economics and Everyday Life, 2

"[E]conomic relations constitute a machinery by which men devote their energies to the immediate accomplishment of each other's purposes in order to secure the ultimate accomplishment of their own, irrespective of what those purposes of their own may be, and therefore irrespective of the egoistic or altruistic nature of the motives which dictate them and which stimulate efforts to accomplish them. And the things and doings with which economic investigation is concerned will therefore be found to include everything which enters into the circle of exchange—that is to say, everything with which men can supply each other, or which men can do for each other, in what we may call an impersonal capacity; or, in other words, the things a man can give to or do for another independently of any personal and individualised sympathy with him or with his motives or reasons."

—Philip H. Wicksteed, The Commonsense of Political Economy, 1910

Economics and Everyday Life

"[T]he general principles which regulate our conduct in business are identical with those which regulate our deliberations, our selections between alternatives, and our decisions, in all other branches of life. And this is why we not only may, but must, take our ordinary experiences as the starting point for approaching economic problems. We must regard industrial and commercial life, not as a separate and detached region of activity, but as an organic part of our whole personal and social life; and we shall find the clue to the conduct of men in their commercial relations, not in the first instance amongst those characteristics wherein our pursuit of industrial objects differs from our pursuit of pleasure or of learning, or our efforts for some political and social ideal, but rather amongst those underlying principles of conduct and selection wherein they all resemble each other; for only so can we find the organic place of industry in our conception of life as a whole."

—Philip H. Wicksteed, The Commonsense of Political Economy, 1910

TGIF: What Government Has Wrought

Imagine two candidates for president, and ask yourself who is more likely to win.

Candidate A observes that people are facing generally rising prices. Their total at the supermarket checkout is higher than last year. Filling up the car at the gas station takes a bigger bite out of the budget. Everything the kids need seems costlier. Besides all that, the prospect of buying a home or moving to a larger apartment looks grim—too expensive.

Responding to this situation, Candidate A launches a campaign promising to defend the middle class and other working people against "corporate greed." Specifically, he proposes an expanded child tax credit, a crackdown on "price gouging," and down-payment subsidies to first-time home buyers. Targeted tax credits to homebuilders and small businesses are among the promises. (These and other tax credits are called "refundable," which means qualifying people who pay little or no taxes have their nonexistent tax payments refunded to them—a logical impossibility.)

Candidate B, not your typical frontman for a mass-marketing campaign, sees the same hardships as Candidate A, but he has a different message. He pledges to move heaven and earth to repeal taxes on savings, investment, and business, including the capital-gains tax and the corporate income tax. He explains that taxes on savings, investments, and enterprises are dishonest because businesses don't pay taxes; they collect them—from workers, customers, and corporate shareholders. Such taxes constitute double and even triple taxation. (See Roy Cordato's "Corporations Should Pay Higher Taxes?" and "Taxing Investment." ) He also promises to work to abolish regulation on business, which raises production costs, hikes prices, and reduces the supply and variety of consumer products.

The candidate unabashedly promotes his plan in the name of economic growth and prosperity for everyone. He does so because he believes that the only way for everyone to get rich(er) is for production to expand, for labor to become more productive, and for real prices to fall through increased supplies. That requires saving and investment, that is, deferred consumption. Anything that discourages savings is bad, he says. He favors prosperity, he says, over income equality, which is a recipe for poverty.

The candidate proposes to accommodate the lost revenue by pushing Congress to cut spending all through the budget. He also calls on the governors, county executives, and mayors to eliminate the barriers to home and apartment construction, including zoning, because, he notes, high housing prices are caused by politically restricted supply. This is especially egregious where some of the most lucrative jobs are. However, since housing is artificially scarce, many people can't move to where the best jobs are because they're priced out of the housing market. He also promises to get rid of any federal regulations that keep the housing supply from meeting the demand.

In general, Candidate B explains to voters that increased consumption requires increased production (not vice versa) and that bureaucracy discourages savings and raises costs and prices. The government is not good at creating real wealth; it is a consumer and engine of transfer, not a producer.

Who's likely to win the election? The one who promises direct help to middle- and working-class consumers or the one who promises to help them indirectly by freeing up entrepreneurship and free enterprise?

Does anyone doubt who, other things equal, would prevail? Candidate A would be widely portrayed as a champion of the people, a hero bursting with compassion and courage to take on special interests. Candidate B would be portrayed as a shill for Big Business and Wall Street, who favors having all the wealth go to the top 20 or even 1 percent, while the rest of America gets poorer and poorer. (Although that is the opposite of what's been happening for many decades.)

In other words, the candidate who understands how the free-enterprise system tends to work when left unmolested by politicians and bureaucrats will be scorned as an enemy of progress. Meanwhile, the candidate who either is ignorant of economics or engages in demagoguery will be lifted on people's shoulders and carried into the White House.

That's what a representative democratic republic produces. The result is a total national debt—$35 trillion and change—larger than GDP—almost $29 trillion—not counting the unfunded liabilities of the so-called entitlement programs. Interest paid on the debt will be about $900 billion this fiscal year, which ends September 30. Annual budget deficits have hit $2 trillion, which the government covers by selling bonds, which in turn the Fed (short for Federal Inflation Generator) buys up, creating money out of thin electrons. Inflating the money supply then raises prices generally as more dollars chase the same amount of goods, imposing hardship on regular people. A fiscal crisis looms.

If this tale of two candidates does not make you question the utility of government, what would?

TGIF: "We Have Met the Enemy and He Is Us"

The famous line "We have met the enemy and he is us" is from Walt Kelly's comic strip, Pogo. Kelly adapted the line from a U.S. naval commandant who, during the War of 1812 against Great Britain, reported to his superior, “We have met the enemy and they are ours.” Kelly did the parody for the first Earth Day in 1970, a pro-state, antimarket, antihuman occasion.

More constructively, we can apply Kelly's slogan to a bigger matter, namely, who's to blame for the bad policies that representative democracy turns out? Is the culprit an elite group of politicians, bureaucrats, and Big Business/Big Labor cronies, that is, a ruling class that conspires against the public interest? Or is the culprit " us," or, more precisely, the voters?

Most libertarians, like most progressives, would reply "ruling class," although David D. Friedman, a leading libertarian free-market anarchist, has been a major exception. (See The Machinery of Freedom: Guide to Radical Capitalism, 3rd ed., ch. 38, free online.) So too is economist and anarcho-capitalist Bryan Caplan.

Two important libertarian thinkers, Frédéric Bastiat (1801-1850) and Ludwig von Mises (1881-1973), also dissented from the common view that democracy is routinely hijacked. "One striking feature of the Bastiat-Mises view," Caplan writes, "is that politicians are actually tightly constrained by public opinion. On their account, democratic competition keeps elected officials in line; if they deviate from majority preferences, they lose elections and their jobs."

In his classic work The Law, Bastiat, the fantastic French classical-liberal political-economic essayist, pointed out that in a democracy with universal suffrage, the main potential threat to liberty and property would come not from a ruling elite but from the voters, who previously had no voice in the government. If voters know nothing about economics and are antimarket to boot, watch out! They will want the politicians to interfere with market relations, not realizing that intervention is harmful because it has significant opportunity costs: all the good things that would have been produced had the government not engaged in "legal plunder." The benefits of free markets are counterintuitive, and understanding requires knowledge, which the voters lack. So they favor import restrictions, business and farm subsidies, regulations, heavy spending, and other apparently free benefits.

Since the politicians want to be elected and reelected, they will cater to the voters' preferences, even if the politicians know that those preferences are harmful. Democracy supplies poison because voters demand poison. The voters' will is not substantially throttled by special interests.

Bastiat wrote:

Up to now, legal plunder has been exercised by the minority over the majority as can be seen in those nations in which the right to pass laws is concentrated in just a few hands. However, it has now become universal and equilibrium is being sought in universal plunder. Instead of the injustice existing in society being rooted out, it has become generalized.

In another place (Selected Essays on Political Economy, chap. 9), he wrote that "public opinion, whether enlightened or misguided, is nonetheless mistress of the world."

And again (Economic Harmonies, chap. 4): “Political power, the law-making ability, the enforcement of the law, have all passed, virtually, if not yet completely in fact, into the hands of the people, along with universal suffrage.”

H. L. Mencken, that keen observer of America in the first half of the 20th century, might have read Bastiat: "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

Caplan confirms Bastiat's view. In various writings he explains that while most social scientists, including public-choice economists, believe that special interests do thwart the voters, it is untrue. 

The "point is not that no unpopular policies exist," Caplan and Edward Stringham write after scouring the data (citation below). "But bona fide examples are hard to come by, and quantitatively significant ones are scarcer still." Time delays and "frictions" may put the politicians and voters out of sync—but only temporarily.

Voters can afford to be, in Caplan's words, "rationally irrational." In any election, each person can costlessly vote according to his antimarket biases since no single vote is decisive and the total cost of a candidate's bad policies will be shared by all.  (See The Myth of the Rational Voter: Why Democracies Choose Bad Policies and the articles linked below.)

Caplan points out that Ludwig von Mises took a position similar to Bastiat's. In Theory and History, Mises wrote:

A statesman can succeed only insofar as his plans are adjusted to the climate of opinion of his time, that is to the ideas that have got hold of his fellows’ minds. He can become a leader only if he is prepared to guide people along the paths they want to walk and toward the goal they want to attain. A statesman who antagonizes public opinion is doomed to failure… [T]he politician must give the people what they wish to get, very much as a businessman must supply the customers with the things they wish to acquire.

I found that quote, like the Bastiat quotes above, in the first of two Caplan blog posts: Mises and Bastiat on How Democracy Goes Wrong, Part I, and Part II. (For more, see Caplan and Edward Stringham's "Mises, Bastiat, Public Opinion, and Public Choice.")

We might resist the claim that the people, not a ruling class, are to blame. But if we have a ruling class, it must be damned incompetent. The United States has the most progressive income tax in the West. The bottom half of income taxpayers pays only a tiny fraction (2.3 percent) of the national government's revenue from the tax. The top 1 percent pays over 45 percent. Big businesses face myriad regulations, often with exemptions for small firms. New restrictions are proposed almost every day. Antitrust prosecution always looms for the successful. Businesses and farmers get subsidies and other favors, but most people support them as socially beneficial.

Moreover, privileges granted to one industry impose higher costs on others. Tariffs for U.S. steelmakers burden steel-using companies, making them less competitive in the global market. If this ruling class is so fragmented and ineffective, maybe the concept is so imprecise that it is misleading.

When well-connected interests (who include not only business people) influence policy, Caplan writes, it's at the margin and, if anything, waters down what the majority wants. Caplans notes that more-educated people tend to understand economics better than less-educated people. Without "elite" influence, tariffs and minimum wages might be more destructive than they are.

Well, if the state is not "the executive committee of the ruling class," as Marx claimed, what is it? It's a bazaar where candidates offer goodies to blocs of economically illiterate citizens. The currency is the vote. To gain power, politicians need to win a majority—repeatedly. Yes, the people are propagandized, but just as businesses fail when enough consumers exercise skepticism about a product, regardless of advertising, so voters can exercise skepticism about the politicians' claims. People are not robots, and they encounter competing sources of propaganda/information. The joint that connects official propaganda to popular opinion is, to say the least, loose. If people are gullible, who's to blame?

What's the bottom line? No one can triumph in a struggle without first identifying the adversary. If the adversary is a shady, manipulative, nearly omnipotent ruling class, that would require one strategy. But if the adversary is the public's economic illiteracy and, as Mises repeatedly put it, its failure to grasp its "rightly understood (i.e., long-run) interest" in the free market, that's another matter entirely. Since that is indeed the case, freedom advocates should act accordingly.

The battleground is human understanding and nothing else, not even institutions, Mises says. As he wrote in Human Action, using 1930s monetary policy as an example (emphasis added):

"Whatever the constitutional state of affairs may be, no government could embark upon 'raising the price of gold' if public opinion were opposed to such a manipulation. If, on the other hand, public opinion favors such a step, no legal technicalities could check it altogether or even delay it for a short time."

TGIF: Freedom or Power

Eugen von Böhm-Bawerk, the Austrian-school economist who learned from Carl Menger and taught Ludwig von Mises, speaks to the ages. We ignore his lessons to our peril. One hundred ten years ago, in a journal article titled "Control or Economic Law," he wrote:

[J]ust as natural phenomena are governed by immutable eternal laws, quite independent of human will and human laws, so in the sphere of economics there exist certain laws against which the will of man, and even the powerful will of the state, remain impotent; and that the flow of economic forces cannot, by artificial interference of societal control, be driven out of certain channels into which it is inevitably pressed by the force of economic laws.

In other words, contrary to what politicians say, we as a society cannot do anything "if only we have the will." Böhm-Bawerk went on:

Such a law, among others, was considered to be that of supply and demand, which again and again had been observed to triumph over the attempts of powerful governments to render bread cheap in lean years by means of “unnatural” price regulations, or to confer upon bad money the purchasing power of good money. And inasmuch as in the last analysis, the remuneration of the great factors of production—land, labor, and capital—in other words, the distribution of wealth among the various classes of society, represents merely one case, although the most important practical case of the general laws of price, the entire all-important problem of distribution of wealth became dependent upon the question of whether it was regulated and dominated by natural economic laws, or by the arbitrary influence of social control.

Böhm-Bawerk was not saying that economic laws were invulnerable to political and social interference or institutions—far from it. The government distorts the market all the time. That's why his lesson is so important. We'd hardly need to be taught about the importance of economic laws if intervention bounced off market participants like bullets off of Superman.

Price controls bring forth not an abundance of low-priced goods to help the poor but shortages of wanted products. Today many people suffer the hardship of government suppression of the building of new houses and apartments. (See Bryan Caplan's Build, Baby, Build: The Science and Ethics of Housing Regulation.)

In any given case, how much influence market forces and nonmarket control have is not an easy question. It takes study rather than dogmatism. However, even political intervention must operate within the law of price. Repeated efforts to abolish interest on loans (usury) have failed because lenders and borrowers eagerly found ways around the prohibition. Markets—bargaining based on subjective marginal utility—will operate despite the formidable obstacles rulers place in their way. That's true for all prices. Thank goodness for that. But consumers will be harmed, and the state's ostensible objectives won't be achieved. 

Böhm-Bawerk notes that the most "selfish" single-seller in the market (assuming no government protection) must contend with the economic laws: "Generally speaking, the fear of outside competition forms perhaps the greatest safeguard against too unscrupulous a use of monopolies preying on the general public." Nothing invites competition like abnormally high prices and profits. That's why would-be monopolists turn to the government for help. Their dreams of power are doomed without it. (Antitrust law is a fraud. It protects inferior companies, not consumers.)

The same is true in a labor market where only one buyer of labor services (employer) is active. If he pays too much or too little under market conditions, economic forces will let him know -- if the government stays out. Profit or loss, success or bankruptcy? That is the question. 

Böhm-Bawerk would understand what's happening with fast-food restaurants in California, where the government has mandated a large increase in the minimum wage:

If an entrepreneur is induced, through the motive of self-interest, to select the “minor evil,” and permits a wage increase exacted from him, then an analogous motive of self-interest will urge him to reorganize the various factors of production by means of which he produces his goods. If the factor of production called “labor” has become more expensive than before, in comparison with the other factors of production, through an extorted wage increase, then it is almost unthinkable that the same relative apportionment of the various factors of production would remain the most rational in an economic sense....

California fast-food joints are closing, substituting machines for human beings, or raising prices. It's happened many times all over the country.

[T]he most imposing dictate of power ... can never effect anything in
contradiction to the economic laws of value, price, and distribution; it must always be in conformity with these; it cannot invalidate them; it can merely confirm and fulfill them.

Mises picked up his teacher's theme. As Israel Kizner writes in his book Ludwig von Mises: The Man and His Economics, quoting from his teacher's Epistemological Problems of Economics,

Mises saw the emergence of economic understanding in the eighteenth and early-nineteenth centuries as introducing a genuinely revolutionary insight into man's understanding of the conditions within which society exists.... With the advent of economic science, [Mises wrote,] "Now it was learned that in the social realm too there is something operative which power and force are unable to alter and to which they must adjust themselves if they hope to achieve success, in precisely the same  way as they must take into account the laws of nature."

Society does not face a choice between control and economic law. Rather, the choice is between unhampered consumer-enhancing economic law and economic law twisted against consumers by bureaucrats. That is because, as Mises wrote in Omnipotent Government: The Rise of the Total State and Total War, "economic laws are inexorable, and ... government interference with business cannot attain its ends but must result in a state of affairs which—from the point of view of the government and the supporters of its policy—is even less desirable than the conditions which it was designed to alter."

TGIF: The Economic Way of Thinking Can Save Lives

Thomas Sowell

The Cambridge economist Joan Robinson (1903-1983) wisely said, "The purpose of studying economics is not to acquire a set of readymade answers to economic questions, but to learn how to avoid being deceived by economists."

Excellent point, though I would both broaden and narrow her category of suspects. I would include most politicians, bureaucrats, pundits, and social-science and humanities professors in the suspect group. And I would exclude the economists -- spoiler alert: primarily those of the Austrian school, although others stand out -- who paint a much more realistic picture of the world than the others do.

For the record, Robinson was sympathetic to John Maynard Keynes and, later in life, communist China's Mao Zedong, and North Korea's Kim Il Sung. Obviously, her study of economics did not teach her how to avoid being deceived by all who represented themselves as economists. (I heard once that Che Guevera became head of Cuba's national bank in 1959 because when Fidel Castro asked his cadre, "Who here is a good economist?" Guevara, thinking he heard, "Who here is a good communist?" raised his hand. But that's apparently apocryphal.)

At any rate, mankind would have been spared a good deal of misery had people learned at an early age to engage in the economic way of thinking. If I were to sum it up in a short phrase, I would say: in a world in which the law of identity, causality, and scarcity rule, you can't do just one thing. Human action has consequences. This apparently is also the first law of ecology, but oddly, environmentalists (as opposed to humanists) seem ignorant of it.

The point is that all human action has rippling consequences across society and across time. The economist who called his textbook The Economic Way of Thinking, the late Paul Heyne, wrote, "All social phenomena emerge from the choices of individuals in response to expected benefits and costs to themselves." (Happily, Peter J. Boettke and David L. Prychitko keep updating the book. It's in its 10th edition.)

Heyne's maxim applies to the choices of politicians and bureaucrats also. So before proposing or endorsing a government policy, one ought to wonder about the social phenomena that are likely to emerge from it. Economics is an indispensable tool in this respect.

Henry Hazlitt's classic, Economics in One Less, is a great way to get started. Hazlitt wrote, "The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." Hazlitt's book elaborated an important message of his intellectual ancestor, Frédéric Bastiat, the 19th-century French laissez-faire liberal, in the classic essay "That Which Is Seen and That Which Is Unseen."

Individuals who adopt this way of thinking are better equipped to judge the promises of politicians, etc. who support taxes, minimum-wage laws, rent control, general wage-and-price controls, and the rest of the program of political authority over contractual freedom and other peaceful conduct. Even well-intended regulations will have unintended bad secondary consequences. Good intentions are never enough.

Any good introduction to the economic way of thinking will introduce readers to concepts like opportunity cost, the unseen, sunk costs, the margin, and tradeoffs. Most people seem to intuit some of these in their own lives. But they fail to do so when it comes to society as a whole. They are encouraged by politicians and pundits to think that common sense in private life does not apply to the big picture.

Opportunity cost refers to the fact when you choose a course of action, you necessarily foreclose another course of action. The true cost, then, is the (subjectively judged) next-best choice forgone. If you buy something for two dollars, your cost isn't really two dollars. It's what you regard as the next best use of those two dollars -- the future not chosen. You might decide afterward that you made a mistake: "I could've had a V-8!" Good economists do not regard people as omniscient robots.

Opportunity cost is another way of looking at trade-offs. If you do or choose A you can't do or choose B. Thus you trade B for A. Trade-offs are inescapable. Thomas Sowell, for whom the word genius is woefully inadequate, dramatically drew attention to this feature of life when he wrote, "There are no solutions. There are only trade-offs." Today's problems, he adds, may well be the result of yesterday's solutions. We'd do well to bear this in mind, especially in deciding what the government should be doing (if anything).

Opportunity costs and trade-offs are examples of the "unseen," another important concept in good economics. Bastiat's fable of the broken window (see link above) debunked the myth that destruction stimulates the economy by prompting spending and thus makes communities or nations as a whole richer. Bastiat showed that a town does not get richer when a store owner has to buy a new window. Sure, he spends money, benefiting some people in town, but wouldn't he have spent the money on something else? What else? No one knows. It's unseen. But we know that he and others are now worse off. The owner has the window, but he would have had a window plus whatever he wishes he could have spent the money on. No general enrichment occurs.

Remember that next time a pundit rhapsodizes about the silver lining in earthquakes and hurricanes ("Think of the jobs that will be created!") or a politician proposes to spend your money. Ask yourself, "What sort of things won't happen?"

Although many other concepts are entailed by the economic way of thinking, I will mention only one more variation on the unseen. This one has incited ugly bigotry and cost many lives: it's the concept middleman.

No one has documented this as well as Thomas Sowell, not only its economic dimensions but more broadly as well.  As Sowell shows in many works (see, for example, Black Rednecks and White Liberals), middlemen -- peddlers, storefront and chain-store retailers, importers, and money lenders -- perform an important service in the market by matching up people who would gain from trade but might otherwise have a hard time finding each other. Retailers specialize in matching manufacturers with consumers, sometimes extending credit, while wholesalers match manufacturers with retailers. Money lenders specialize in matching lenders with borrowers. (Estimating the creditworthiness of borrowers is no piece of cake.)

In short, middlemen save us a lot of inconvenience. Free exchange is win-win or it does not take place. If they do their jobs well, middlemen make us richer, which is why they earn profit. If their function were inherently superfluous, they would be driven out of business by better business forms.

Alas, the value produced by middlemen is unseen by the economically ignorant, but it is real. Historically, successful middlemen, even if they were only slightly richer than the people around them, have been despised for their success, especially (but not exclusively) if they had started out poor and were immigrants who noticeably differed racially or ethnically from the majority population. Why? Because the ignorant believed the middlemen were exploiters. They made good incomes seemingly without creating anything. They "merely" moved goods or money around or made them available sooner rather than later -- as if place and time were irrelevant. Where's the value in that?

Sowell's work shows that this animosity born of economic ignorance and envy is at the bottom of a great deal of the world's racial, ethnic, and religious bigotry and violence, including mass murder, even when such ignorance is obscured by added rationalizations. (Demagogues often fanned that bigotry for political gain.)

"Middleman minorities" have in fact been the most persecuted groups in history all over the world, Sowell writes. That description might bring the Jews to mind, but Sowell shows that the Jews were far from unique in that respect. His list of chronically persecuted and even slaughtered middleman minorities includes the Chinese in Southeast Asia, Lebanese in west Africa, Indians and Pakistanis in east Africa, Armenians in the Ottoman Empire, Ibos in Nigeria, Parsees in India, and Tamils in Sri Lanka.

The magnitude of that violence, Sowell says, dwarfs that of other violence. Middleman minorities were hated not only for their higher incomes but also for the distinctive cultural traits that made that success possible, among them thrift, willingness to work long hours, strong families, and so on. The majority population often was at an economic disadvantage because of its cultural disadvantage; it wouldn't or couldn't compete against the minority, fanning the hatred.

The story is tragically common. Sowell says that while the overseas Chinese and other groups have been called the "Jews of [insert pertinent location]," that could easily be turned around: the Ashkenazi Jews were the Chinese, Lebanese, etc. of Europe.

While emphasizing these beleaguered groups' commonalities, Sowell does not deny the uniqueness of each group's story. The Nazi's unprecedentedly bureaucratized and mechanized elimination of Europe's Jews, of course, comes to mind. Nevertheless, Sowell writes in Black Rednecks and White Liberals (PDF), "In view of what was actually done to some of these other groups [the Chinese and Armenians, for example], there is little reason to doubt that their persecutors would have used such technological and organizational capabilities [as the Nazis used] if they had them." Sowell is no ivory-tower, library-bound intellectual. He's traveled the world more than once for an international perspective on this and related issues.

As I said, mankind would have been spared a great deal of grief -- and would have been much richer -- had people early on learned the economic way of thinking.

TGIF: The Debate Over Taxation Cannot Be Value-Free

Lenin reportedly said, "The best way to destroy the capitalist system [is] to debauch the currency." If by "capitalist system" we mean only what Adam Smith called "the obvious and simple system of natural liberty," we could improve on the quote: the best way to destroy it is to debauch the currency of thought and communication, language. Orwell understood this and made it the centerpiece of Nineteen Eighty-Four.

Read TGIF at The Libertarian Institute.

TGIF (The Goal Is Freedom) appears on Fridays. Sheldon Richman, author of America's Counter-Revolution: The Constitution Revisited, keeps the blog Free Association and is executive editor of The Libertarian Institute. He is also a senior fellow and chair of the trustees of the Center for a Stateless Society and a contributing editor at Antiwar.com. Become a Free Association patron today!

Econ 101

Big difference -- YUGE -- between delivering bombs and delivering goods.

TGIF: The Economic Way of Thinking about Health Care

I realize Mike Lupica is a sports columnist — and that Howard Cosell called sports “the toy department of life” — but maybe that’s what makes Lupica’s recent declaration about Obamacare all the more representative a reaction. Appearing on a morning cable news program, Lupica declared that “health insurance for all is a noble idea.” He repeated this a few times, apparently to make sure we all heard it. 

What’s curious is that it was all he felt he needed to say. It’s a noble idea. Period. If you can’t say something nice about it, say nothing at all. 

Apparently it’s of no interest to him what the term health insurance actually represents today. Of even less interest is how this noble idea is to be achieved under the Affordable Care Act, namely, through the exercise of force, specifically the government’s taxing power.

Read it here.

TGIF: Loving Economics

TGIF this week is a review essay of Peter Boettke’s new book, Living Economics: Yesterday, Today, and Tomorrow. Enjoy!

Op-ed: Cutting Government Would Boost Economy

Budget sequestration is as modest a step toward cutting Leviathan as one can imagine. Further progress will be difficult as long as people believe that slashing the size of government conflicts with reviving the economy. Nothing could be further from the truth.

Read it here.

Richman's Law

No matter how much the government controls the economic system, any problem will be blamed on whatever small zone of freedom that remains.

In Denial

Politicians and pundits reveal their pre-Enlightenment mentality whenever they deny--explicitly or implicitly--that there are economic laws which impose strict limits on what rulers can accomplish.

Latest Scribblings

TGIF: The Ubiquity of Economic Phenomena

Op-ed: Defusing the Middle East Would Lower Gas Prices

TGIF: Affording It All

People who don’t understand — or who don’t care about — economics say funny things. Well, they would be funny if they weren’t so damaging when translated into government policy. Take Lawrence O’Donnell, host of MSNBC’s The Last Word with Lawrence O’Donnell.

Read TGIF: "Affording It All" here.

TGIF: Obamacare Reality Bites

One might think that letting government officials exercise discretion in the enforcement of bad regulations would be a good thing. I’m not so sure.

Read the rest of TGIF: Obamacare Reality Bites.

Op-ed: There's No Such Thing as a Free Mammogram

Read my latest FFF op-ed here.

The Perverse Genius of Politics

Barack Obama held another town meeting today, this one in Fort Myers, Fla. People in the audience stood up and directly told the President of the United States they are hurting because of the recession. Obama listened sympathetically and explained how he will help them. It was all captured on television.

It takes some understanding of economics — which most people lack — to comprehend what’s wrong with that picture. Those people are victims of the state’s misguided interventionist economic policies — after all, the central government has been the steward of the U.S. economy for generations. Yet Obama, the latest chief executive of this economy-wrecking organization, stood before them as their salvation. The news media reinforced that narrative at every step.

This is why it is so difficult for economic sense to make headway.

Syllogism

• Government takes over regulation of an economic activity from the market process.
• Government regulation fails to prevent the bad it was intended to prevent.
• Ergo, the market is incapable of regulating itself, requiring more government regulation

Addendum: This, of course, can be made more general:

• Government assumes responsibility for the economy as a whole (the Fed, fiscal controls, housing policy, etc.)
• The economy goes through bouts of inflation and recession, and sometimes both at once.
• Ergo, since the market process cannot be relied on for self-generated stability, full employment, etc., more comprehensive government control is required.

Cross-posted at Anything Peaceful.

Stimulating Consumption Won't Help the Economy

Ask yourself: can you consume your way to prosperity? Of course not. So how can a society do so? Greater consumption is the effect not the cause of economic growth, yet this is so contrary to conventional wisdom that you can read newspapers and watch news programs for months without seeing this truth expressed.

To say the recession was caused by diminished demand is to say that the recession was caused by the recession. The fact is, people are holding on to their cash because the economy is in recession and they are uncertain about the future. As we’ll see, it is exactly under these circumstances that people should be saving.

The rest of this week's op-ed, "Stimulating Consumption Won't Help the Economy," is at The Future of Freedom Foundation website.