Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

"No matter how vast your knowledge or how modest, it is your own mind that has to acquire it." Ayn Rand

18 May 2008

Thomas Sowell's "Economics Too Complex?" Series

One of the most basic principles of life and also of politics is that wishing something does not make it real. Yes, wishing for something may well serve as an effective means to get us to act to achieve something, but short of the act to achieve it, that value will not materialize in simple response to our wish. Most people come to understand this in their person life when they have matured past adolescence. Unfortunately, it seems that most people do not understand that the same principle applies to the realities that politics are supposed to deal with!

Many of my recent commentaries have made a point of examining issues as a matter of supply and demand, because in reality, this is how things are priced absent government interference, and ultimately, in various perverted ways even with government interference. If government says that only the graduates of accredited medical schools can perform the duties of doctors and then government acts to limit the number of medical internships which then prevents medical schools from training more doctors, then there will be a shortage of doctors as the population grows and ages. This is what has happened over the last 20 or so years. The shortage of doctors means that doctors can charge more for their services, or if Medicare says they cannot, then they may work fewer hours or retire early. Patients will have less time to discuss their symptoms with the doctor and he will have less time to treat them, to consider interactions between the several drugs a patient might be on, or to review how effective a given treatment was. These issues are not dominated by a desire on the part of doctors to serve patients badly. They were not due to government bureaucrats thinking that it would be good to have a shortage of doctors. There is probably little intentional evil being done here, but there is evil afoot nonetheless. There is the evil of not thinking through important issues in a rational way and then taking foolish actions with the government's monopoly on force while not understanding very understandable issues. It is a shirking of responsibility for thinking, usually in favor of the emotional appeal of nonsense. The real problem here and in a very great many political issues is one of the supply of limited resources and the demand for those limited resources. Unfortunately, politics is usually ruled by politicians pandering to and often encouraging people only to decide issues upon emotional criteria, while ignoring entirely, or at least largely, the basic issues of supply and demand.

Thomas Sowell has just written a series of three commentaries on whether economics is too complex for people to understand or is it that they simply prefer the emotional appeal of thinking only in terms of heroes and villains? In Part 1, he talks about the price of oil to illustrate the preference for false emotional ideas of heroes and villains rather than a critical discussion of supply and demand.

In Part 2, he illustrates this with affordable housing as an issue, though he briefly alludes to restrictions on drilling oil put in place by politicians who are then the loudest in protesting higher prices for oil. He notes: "So long as politicians can get some people's votes by publicly feeling their pain when it comes to housing costs, and other people's votes by restricting the building of housing, they can have a winning coalition at election time, which is their bottom line." Then "So long as voters prefer heroes and villains to supply and demand, this game will continue to be played. It is not because supply and demand is too "complex" to understand, but because it is not emotionally satisfying."

In Part 3, Sowell writes about the tendency of government to object to large businesses selling goods and services for less than smaller local businesses may be able. He talks about San Francisco banning chain stores from some parts of the city. He talks about how the mistaken notion of "a living Constitution" has come to destroy property rights. This results in the economies of scale not being passed along to consumers who can then buy products for less. He mentions the bias against Wal-Mart and the Robinson-Patman Act of 1936, which was known as the anti-Sears, Roebuck law. He mentions the Standard Oil Company and Great Northern Railroad Trust break-ups, despite the fact that they provided ever lower prices. Over and over, Fair Trade laws were used to keep consumers from the enjoyment of lower prices. The reason was that it was more effective politically to indulge people's emotions against so-called villains than it would have been to rationally analyze the costs in terms of supply and demand. Sowell says: "Neither economics nor property rights are too "complex" to understand. But both get in the way of willful people who seek to deny other people the right to make their own decisions." Instead of personally refusing to use a chain store, the villain-destroying person assumes that they have the right to stop others from using their own freedom of choice on whether to shop at the chain store.

Without thinking issues through on the basis of supply and demand, it is very easy to identify the good guys as the villains and the villains as the heroes. A large fraction of the population makes a habit of doing just this.

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