Essential Economics for Politicians

Bruddah IZ said:

The Magic of Socialism
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Myth 1: Collectivists Care More About the Poor

No magic wand can ever transform the most wonderful intentions of collectivists into good results. Milton Friedman observed, “Concentrated power is not rendered harmless by the good intentions of those who create it.”

We can’t measure intentions, but we can see results. Capitalists have brought billions of human beings out of poverty while collectivists have starved to death millions. Freedom enriches; force impoverishes. “A society that puts freedom first,” wrote Friedman in Free to Choose, “will, as a happy byproduct, end up with both greater freedom and greater equality.”

In Venezuela, Kurmanaev observes how the façade of good intentions has dissolved:

What struck me on arriving was how little the Socialist leaders cared about even the appearances of equality. They showed up at press conferences in shantytowns in motorcades of brand new armored SUVs. They toured tumbledown factories on live state TV wearing Rolexes and carrying Chanel handbags. They shuttled journalists to decaying state-run oil fields on private jets with gilded toilet paper dispensers…

In Venezuela, I saw children abandon schools that had stopped serving meals and teachers trade their lesson books for pickaxes to work in dangerous mines. I saw pictures of horse carcasses on the grounds of the top university’s veterinary school—killed and eaten because of the lack of food.

Kurmanaev reports, “[T]he so-called Socialist government made no attempt to shield [from cutbacks] health care and education, the two supposed pillars of its program.” As if there could be a benign form of socialism, Kurmanaev adds, “This wasn’t Socialism. It was kleptocracy—the rule of thieves.”
 
Myth 2: Those with Good Intentions Solve Problems the Market Can’t

We get the leaders our beliefs have called forth. In The Road to Serfdom,Hayek points out how people blame “the system” for their troubles and “wish to be relieved of the bitter choice which hard facts often impose upon them.” Thus they “are only too ready to believe that the choice is not really necessary, that it is imposed upon them merely by the particular economic system under which [they] live.”

In his book The Essential Hayek, the great economic educator Don Boudreaux writes,

If government remains committed to protecting from the downside of economic change all who clamour for such protection, the powers of government must necessarily expand until little freedom of action is left to individuals.

Boudreaux explains how blocking change creates poverty:

Unfortunately, because economic growth is economic change that requires the temporarily painful shifting of resources and workers from older industries that are no longer profitable to newer industries, the prevention of all declines in incomes cannot help but also prevent economic growth. The economy becomes ossified, static, and moribund. So achieving complete protection of all citizens at all times from the risk of falling incomes means not only being ruled by an immensely powerful government with virtually no checks on its discretion, but also the eradication of all prospects of economic growth. Inevitably, at the end of this road paved with the good intention of protecting all producers from loss lies not only serfdom but also widespread poverty.

Is it flippant to argue the market will sort out our problems? Boudreaux explains why, rather than being flippant, those who promote the entrepreneurial discovery process are placing society on the superhighway to easing hardship:

“Let the market handle it” is to reject a one-size-fits-all, centralized rule of experts. It is to endorse an unfathomably complex arrangement for dealing with the issue at hand. Recommending the market over government intervention is to recognize that neither he who recommends the market nor anyone else possesses sufficient information and knowledge to determine, or even to foresee, what particular methods are best for dealing with the problem.

To recommend the market, in fact, is to recommend letting millions of creative people, each with different perspectives and different bits of knowledge and insights, each voluntarily contribute his own ideas and efforts toward dealing with the problem. It is to recommend not a single solution but, instead, a decentralized process that calls forth many competing experiments and, then, discovers the solutions that work best under the circumstances.

Kurmanaev went to an event held by the Central Bank of Venezuela. He expected to learn how the bank planned to improve the economy. Instead, at 10 am, he found himself at a beach party where vodka and rum flowed. Nelson Merentes, the head of the Bank, was there. Kurmanaev found Merentes “waving maracas and dancing with a bevy of young women in tight denim shorts.”

One anecdote proves little, but in The Road to Serfdom Friedrich Hayek shows why under collectivism the “worst get on top.”

What bigger recipe for disaster could you want? The “worst” planning the lives of other people.
 
Myth 3: The Economy Prospers Under Socialism
Kurmanaev observes this about the Venezuelan economy:

By the end of 2018, it will have shrunk by an estimated 35% since 2013, the steepest contraction in the country’s 200-year history and the deepest recession anywhere in the world in decades. From 2014 to 2017, the poverty rate rose from 48% to 87%, according to a survey by the country’s top universities. Some nine out of 10 Venezuelans don’t earn enough to meet basic needs. Children die from malnutrition and medicine shortages…

Caracas has long been a dangerous yet vibrant city, but the crisis has transformed it into a zombie movie set. When I moved into my neighborhood of Chacao, in the eastern part of the city, the streets were full of food stalls, cafes and shops run by Portuguese, Italian and Syrian immigrants. Groups of young and old stayed in the streets drinking beer or chatting into the small hours.

But Chacao’s streets are now empty after dark. Most of the streetlights no longer work, and the only people outside after 8 p.m. are homeless kids rummaging through garbage bags.

Initially, socialism seemed to produce a free lunch.

[T]he poor got subsidized food and free housing. The middle class got up to $8,000 of almost-free credit card allowances a year for travel and shopping. And the rich and politically connected siphoned off up to $30 billion a year of heavily subsidized dollars through shell companies.

Professor Boudreaux explains the inevitable collapse of an economy without “private property rights, freedom of contract, the rule of law, and consumer sovereignty”:

Indispensable to the creation, maintenance, and growth of widespread prosperity is an economic system that uses scarce resources as efficiently as possible to create goods and services that satisfy as many consumer demands as possible. To the extent that the economic system encourages, or even permits, productive resources to be wasted, that system fails to achieve maximum possible prosperity. If, say, large deposits of petroleum beneath the earth’s surface remain undetected because the economic system doesn’t adequately reward the human effort required to find and extract such deposits, then people will go without the fuel, lubricants, plastics, medicines, and other useful products that could have been—but are not—produced from this petroleum.


Atlas is starting to Shrug again!!
 
Bruddah IZ said:

The Magic of Socialism
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How Socialists Make Economics the "Dismal Science" in Spite of Rising Prosperity



by Kevin Villani


Eighteenth-century economist Thomas Carlyle called economics a dismal science not just in reaction to economist Tomas Malthus’ view that economic stagnation and collapse due to population growth was inevitable but also to John Stuart Mill's calls for individual liberty (and as a consequence freeing the American slaves) as the way to improve aggregate economic well being. Economics remains the dismal science, today led by “secular stagnationist” Robert Gordon. But as famed physicist Richard Feynman noted, if a field has science in its name, it probably isn’t!

 
Economic Exploitation is Political

Political economy up to the 17th century was mostly exploitative: slavery, serfdom, mercantilism and imperialism were all forms of exploitation by those with political power and influence—cronies—who could exploit those without it. Wealth and income were redistributed rather than created. A century later in 1776 Adam Smith published the Wealth of Nations, coincidentally the same year as the American Revolution, describing how a market economy works to benefit all based on Mills’ individual liberty. Almost a century later economist Karl Marx described this “capitalist” system as exploitation of the working classes (the proletariat) by the owners of capital (the bourgeoisie). This remains the dominant narrative, but doesn’t explain increasing prosperity.
 
Prosperity is Absolute, Envy is Relative

Analogously, seventeenth-century Newtonian physics described the laws of gravity governing the universe for several centuries, but it could not explain gravity, the force that held us down. Einstein set out to resolve the discrepancy between the Newtonian theory of gravity that implied the speed of light was “relative” with the perhaps most important but largely ignored empirical observation by electromagnetic physicists in 1887 that the speed of light was constant. Literally outside the physics profession from his perch at the patent office, he conducted a thought experiment: a person inside a box hung from a crane whose cable causes it to accelerate upwards would interpret the g-forces of acceleration as being held down by gravity but when viewed from outside the box would be rising. This led to his “special” and later “general” theory of relativity in which gravity and acceleration is the same thing.

What Marx saw as exploitation was the beginning of generally rising prosperity. Over the past century since Einstein’s relativity the most important but overlooked empirical economic finding is that virtually all aggregate human progress is a direct consequence of Mill's economic liberalism: private market capitalism. The exploitation felt by the lower economic classes is relative to the owners of capital. The corollary empirical observation is that improvements in economic well being are inversely related to the size and scope of government. In the extreme, socialist systems with state ownership of the means of production stagnate and collapse: in the Einstein thought experiment socialists cut the cable, producing a euphoric sensation of floating until the box crashes to the ground.
 
Political Rent-seeking is Exploitative, the Profits of Innovation Just


In Knowledge and Power (2013) George Gilder describes how and why such concentrations of private capital produce innovative investment providing widespread improvement of material well being: ownership provides the incentive and accumulated entrepreneurial knowledge the ability to innovate. An optimist, Gilder rejects the secular stagnationist limits to innovation.

That progressive politicians and the administrative state should reject this empirical evidence in favor of the exploitation narrative isn’t hard to understand. Economists and historians are also included among the intellectual elite, “rentiers” rather than producers. Class warriors led by Thomas Picketty focus on the relative distribution of wealth—envy—to maintain the exploitation narrative in support of state redistribution.
 
The Socialist Free Lunch: Still Good Bait to Elective Totalitarianism

Bernie Sanders, the socialist candidate for the 2016 Democratic nomination, attracted strong support from millennials. His message ignored the history of socialism—the 45 million deaths resulting from Mao’s bringing socialism to China, or the 100 million deaths in the Bloodlandsbetween Hitler and Stalin, or the collective memory loss of socialists globally described in the Last Exit to Utopia – in favor of the myth of Scandinavian socialism, in reality the fruits of a globally competitive capitalist economy.

Millennials were likely conditioned directly or indirectly for their socialist sympathies from A Peoples History of the United States (1980) by Howard Zinn, who shared the same background and worldview as Sanders, absorbing Marx at an early age and oscillating between socialism, “democratic socialism” and social democracy later in life. Zinn provides a compelling disturbing history from the perspective of the people inside the box. But he merges the absolute exploitation of e.g. indigenous Indians and imported slaves with the more likely relative exploitation of indentured servitude and other immigrants. He then equates “profit” with the exploitive systems of slavery, servitude, Indian genocide, mercantilism, imperialism and crony capitalism, implicating liberal market capitalism. These two social justice warriors led their young lambs down the Road to Serfdom.

Charlie Chaplin once told his good friend Albert Einstein that they were the two most famous people in the world but that he was popular because everybody understood exactly what he was doing whereas nobody understood what Einstein was doing. Einstein claimed that had he been able to obtain a university appointment instead of the patent office job he would never have been able to think outside the box and publish his theory of relativity. Same goes for entrepreneurs.
 
Washing Machine Tariffs Started the Trade War. Result? Largest-Ever Three-Month Increase in Washing Machine Prices
Trump’s ill-advised trade war is really largely a war on Americans


by Mark J. Perry

Backfire Economics

As simple economics tells us, the Trump tariffs on washing machines aren’t imposed on foreign appliance producers like Samsung and LG as much as they are imposed on Americans in the form of higher prices for consumers. Likewise, Trump’s ill-advised trade war, which started in January when he approved the tariffs on imported washing machines, is really largely a war on Americans. The February-May 16.4% increase in the CPI for washing machines is just the first of many price increases on U.S. consumers and firms from Trump’s trade war that are guaranteed to lead to net job losses and impoverish, not enrich Americans.
 
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Wadda mean that was a Palestinian " Glory Hole ".....
 
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