It’s Simple! Leave the Economy Alone!

Posted on April 19, 2012

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John Stossel said pretty much the same thing

…a true free market doesn’t require much. It’s not like an orchestra in need of a conductor. What it needs is property rights, so no one can take your stuff. Then people trade property to their mutual advantage. Resources move around without the need for a central, coercive government telling people which resources should go where — or telling them that they must get permission to do what they think is advantageous.

So what is a true free market economy? It’s billions of  people all around the world making voluntary decisions about what to , what to sell and, what to produce. There is no group of people anywhere in the world or any computer that can predict what decisions those billions of people are going to make at any given point in time. But, that doesn’t stop governments from trying to do just that.

Think about our own federal government. We have 435 Congressmen, 100 Senators, a president and, God knows how many bureaucrats all making laws and regulations every day that affect the economy and generally in a bad way. For example, the government decides to subsidize electric cars. The factory that will produce the cars start making orders for materials and supplies needed. Some business in India sees an increase in demand for the product it produces. The owner decides to invest in more equipment also hires more people. The Indian management may have no idea what the end use is for this product they are producing.  But back in the states the demand for electric cars is very low. Orders from the Indian factory drop rapidly. The Indian management has to layoff people and idle equipment.  The demand single that the Indian company thought they saw  was false and they malinvested their capital. This type of thing happens all the time when governments interfere in the market place.

Stossel correctly assesses what government can and can not do about jobs.

Creating jobs is not difficult for government. What is difficult is creating jobs that produce wealth.

The private sector does that.

He is right. The Soviet Union had full employment but they weren’t producing much in the way of wealth.

Walter E. Williams also chimes in on this subject.

…I’d be worthless as an adviser to either the White House or Congress because if they asked me what they should do to get the economy going, I’d answer, “Do nothing!” Let’s look at it. Between 1787 and 1930, our nation suffered both mild and severe economic downturns. There was no intervention to stimulate the economy, but the economy always recovered.

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You say, “Williams, the White House and Congress should do something.” The track record of doing nothing is pretty good compared with doing something. None of our economic downturns in the century and a half prior to 1930 lasted as long as the Great Depression.

There is no way to improve upon the free market system, PERIOD!

Innovation and technology have made it so that all the goods and services we need can be produced by fewer and fewer people. That, of course, leads to high unemployment. Ironically the only solution to creating jobs for these people is more innovation and entrepreneurship. New wealth and new products that people will want o buy to improve their lives is the only answer. But, innovation and entrepreneurship flourish best in a free market economy. Will we ever go back to a free market economy? Dr. Williams doesn’t think so:

It would be political suicide for a politician to follow my counsel — and for good reason. Americans have been miseducated into thinking that Roosevelt’s New Deal saved our economy. That miseducation extends to most academics, including economists, at our universities, who are arrogant enough to believe that it’s possible for a few people in Washington to have the information and knowledge necessary to manage the economic lives of 313 million people. Good economists recognize our limitations, making us not nice people to be around.

It doesn’t sound very promising, does it?

Well, that’s what I’m thinking. What are your thoughts?

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Posted in: Economy