What Will Not Work

A summary on the basics of economics and power.

Government cannot do those things [solve problems] directly. If it tries, it will fail and make us worse off. The key to understanding this lies in the nature of human action. We live in a world of scarcity, and the list of scarce resources includes time and knowledge. At any moment demand exceeds supply. Under these conditions, we adapt means to achieve chosen ends. We face opportunity costs and make tradeoffs according to our subjective preferences. The perception of costs prevents us from achieving lesser values at the expense of greater values. Respect for other people and their property, backed by law, prevents us from shifting costs to them without their consent. The result is the market — that emergent order which serves the general welfare and encourages personal responsibility as each person pursues his or her private interests.

If government, which, recall, is force not eloquence, intervenes — to raise or lower costs, to increase or reduce rewards, to tamper with prices or interest rates — we will modify our behavior, knocking self-interest and the general welfare out of alignment. A subsidy for medical insurance will increase the demand for services and raise prices. A price ceiling will make those services less available. A floor under wages will make jobs for unskilled workers more scarce, as employers find it a losing proposition to hire them. A tax on production will mean less produced. A subsidy to production will mean too much produced relative to something else consumers want. A trade restriction will lower living standards at home and abroad.

Thanks to FLOURCHILD for the link!


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