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An election in today’s welfare-fiat world is
somewhat like gangs of people pushing on a big sow in different directions,
trying to get it to move their way. So who won the pushing contest Sunday
in Greece? The media tells us it’s the conservatives, who will stay the
course and keep the sow on an austerity diet once they form a new government.
But the losers are not without influence, and they don’t like this
frugality business, so maybe the new government will only mostly stay
the course. They will negotiate with creditors. They will attempt to exchange
their present deal for something more pleasing to the also-rans.
In the perpetual crisis of modern banking and sovereign states it may seem
that economics is an arcane art beyond man’s comprehension. Yet, its
mystery is purely man-made.
In its broadest sense, economics can be thought of as the study of exchanges.
This is how it is defined by Robert Murphy, author of an unusual textbook
called Lessons for the Young Economist. It’s unusual in that it’s methodical
without being tedious. In fact, it’s downright fascinating.
The economists who were blindsided by the 2008 crisis were neck-deep in
charts, aggregates, and bad theory they believe in to this day. They tell us
no one saw the train coming, so if everyone was blind, no one was blind. The
train wreck was just an unfortunate reminder that economics is hard stuff. Better to leave it to the experts at the Fed and
other places where high IQs run rampant.
Problem is, economists of the Austrian school, such
as Murphy, saw the train coming as soon as it left the station. Every train
that leaves the interventionist station has its fate written in economic law,
as expounded in the works of Mises, Hayek, Rothbard,
and others, including Ron Paul. Everything that has happened in the past decade, and
longer, has had all the suspense of a bad novel - for Austrians.
Did the Fed inflate pre-crisis? Like mad. Perhaps at Paul Krugman’s suggestion,
Alan Greenspan created a
monster housing bubble to replace the dot-com bubble. Did it inflate in
response to the bust? Bernanke spiked the
monetary base. Are investors calling for even more monetary pumping? The ones
calling for
QE3 are. And there are countless nervous others hovering around the panic
button ready to join them. Will this pattern ever end? Yes - and
there’s an unspoken terror behind that thought.
Murphy’s book, though geared to bright middle schoolers,
provides the tools for understanding what the interventionist crowd seems
unable to grasp, which is this: Unhampered markets have built-in regulatory
mechanisms that keep the train on the tracks. And the issue at stake could
not be more critical. As we read on page 9:
Unlike other scientific disciplines, the basic
truths of economics must be taught to enough people in order to preserve
society itself. It really doesn’t matter if the man on the street
thinks quantum mechanics is a hoax; the physicists can go on with their
research without the approval of the average Joe. But if most people believe
that minimum wage laws help the poor, or that low interest rates cure a
recession, then the trained economists are helpless to avert the damage that
these policies will inflict on society.
The world’s policymakers as well as the people
who suffer under them could benefit enormously from committing that passage
to memory. We have, in essence, exchanged sound economic principles for very
bad ones - ancient fallacies framed in modern jargon - and are
now wondering why the economic outlook is so threatening.
The idea of “exchange,” though, is not limited to the trading
activities of individuals in which goods and services are traded for money or
for other goods and services. In every aspect of our lives we’re
confronted with the possibility of exchanging the status quo for something
else. The exchange can be performed by an individual in isolation, such as
the shipwrecked fictional character Robinson Crusoe who must build a one-man
economy, or the change can be brought about by people acting together . . .
as Greek voters did recently.
Exchanging education for state indoctrination
In the early 19th century educational reformers began
“exchanging” the Jeffersonian system of voluntary parental
education for a more collectivist approach inspired by the despotic Prussian
system. Jefferson was a strong advocate of public schools for the poor, but
an equally staunch opponent of compulsion in education. Yet, by the end of
the 19th century almost every state had compulsory public schools in
which the “virtues” of obedience, equality, and uniformity were
inculcated, sometimes violently, while independent thinking was discouraged
or punished.
Given the educational system, should we be surprised that government inroads
into the economy and our private lives take place without much resistance?
In 1913, we exchanged a high tariff for the income tax. Then got the high tariff again later.
In 1917, we exchanged peace for war. Then peace for war again a generation
later. And finally peace for perpetual war.
In 1933, we exchanged economic liberty for economic fascism. It still bears the name of “free market
capitalism,” though, which is useful for confusing people when
the fascists in power screw things up.
After 2001, we exchanged freedom for security and are getting less of both.
But the biggest disaster has been the exchange of market money for political
money, initiated in 1933 and completed in 1971. Every American and dollar holder is now at the mercy
of bureaucrats instead of Mother Nature.
In economics, all voluntary exchanges are win-win
agreements at the time of
the transaction. Both sides to the trade believe they’re improving
their lot, otherwise they wouldn’t agree to make it. When politicians
take to making exchanges for our benefit, however, we’re almost always
on the losing side. Someone must be winning, but in the end it’s not
clear who.
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