Wednesday, April 29, 2009

Selective Free Market Economics and the Decline of Freedom

I double majored in economics and mathematics in college, the mention of which causes my wife to roll her eyes and make that finger-in-the-throat gagging gesture. Nevertheless, I'm glad I did the two majors together, as I have used them many times in my law practice. I am also finding them invaluable now, as I watch our society unravel.

One interesting phenomenon that characterizes today's modern Democrats is the way they use free market economics to accomplish certain goals that will inevitably deprive us of more of our freedoms and the way, when it benefits their own pet projects, they successfully use the supply side economics they deride in all other cases.

A couple examples:

Our governor, Tinkerbell, refuses to cut taxes (or spending, for that matter) to make Michigan a more business-friendly state generally. But, when it comes to liberals' most cherished industry -- entertainment -- she had no problem pushing through tax cuts and trumpeting their success in turning Michigan into a Midwest Hollywood. These tax cuts produced an entirely rational and self-serving response from the movie industry -- they moved to where their costs were lower! This must have shocked our governor into paralysis, because she hasn't tried this since, and she shows no inclination to do the same thing for the rest of Michigan's economy.

Meanwhile, in Washington, the One is pushing his cap-and-trade plan for carbon dioxide emissions that he even says will "necessarily cause electricity prices to skyrocket." Gee, thanks a lot. That's just what we need right now. Why is he doing this? Apart from the darkest possible explanations (he wants to cripple our manufacturing base), he obviously wants to drive prices of coal-power generated electricity up so that we will look to other sources of electricity, such as those wonderful windmills and the sun. This is another example of market interference that relies for its success on rational behavior by consumers -- searching for lower cost and hence lower priced power.

While decrying the market, both Tinkerbell and the One use market economics and classical supply and demand theory to manipulate events for their own purposes. Film production tax credits and cap-and-trade depend for their success on the very thing that both of them deplore -- people acting in their own self-interest. When they don't like it, they call it greed.

In the same year our nation was founded, Adam Smith published his magnificent The Wealth of Nations, in which he described the phenomenon of the "Invisible Hand," which holds that if consumers are allowed to choose freely what to buy and producers are allowed to choose freely what to sell and how to produce it, such a free market will result in prices and a distribution of goods and services that benefit all members of a community, and hence the community as a whole.

People are driven by self-interest and the desire to increase their own income and utility (a word economists use instead of satisfaction or happiness, to be measured in utils. Not kidding.). Since the income and happiness of society is the sum of individual incomes and happiness, all benefit from the individual pursuits motivated by the Invisible Hand.

When it pleases them, the Democrats employ the mechanisms of the free market in a twisted and horrific way, but they absolutely refuse to allow the market to work generally, believing instead that they, individually, can make better decisions than the collective result of millions of decisions made by consumers and producers every day. This is arrogance, pure and simple.

Beyond arrogant, though, the behavior is dangerous. Raising the cost of electricity astronomically is the only way to make "alternative" energy sources competitive, but all energy sources will be at much higher prices than they are now, which means consumers and businesses will use less energy, which means less economic activity, which means fewer and fewer jobs and lower incomes for those who are fortunate enough to work. This will, of course, translate into demand for government assistance, intervention, and, like we are seeing now, ownership of what we used to call private enterprise.

Freedom? In the future, it will be a luxury the government won't let us afford.

By picking winners (movies and windmills), the Democrats impose higher costs on everyone else who must pay the added burden. Thus, those who are not winners are, instead, losers. What has our governor done to pick up the auto industry? All we hear is that we are too dependent on the auto industry and we need to diversify. That's fine, but in the meantime, they could use a little help. They're not getting it from Lansing, so they're gradually disappearing, first in Michigan, then it will be the rest of the country, until we don't have a domestic auto industry any more. About that time, Tinkerbell will probably want tax cuts for drive-in movie theaters. Driven by windmills, of course.

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