Sunday, April 10, 2016

Upside Down Economics

Everyone should read Adam Smith's "Wealth of Nations."   Smith's main point is that individuals, using only local information and acting to pursue their own interests, are the main wealth creators in every society.  Government's role in Smith's classic is mainly to stay out of the way.

History has proven Smith to be amazingly accurate.  The economic miracle of the19th century created the middle classes of Europe and the US, leading ultimately to the enormous economic boom in the quarter century that followed the conclusion of the second world war.

After 1970, things changed.  Politics intruded and economic growth, except during the Reagan and Thatcher years, disappeared both for Europe and for the US.

The period of "political activism" and the corruption of basic economics began in the 1970s.

What led to all of this is unclear.  It might have been the long period of anti-war agitation connected to the Vietnam war.  Who knows?

What we do know is that, even as Reagan was swept into office with a conservative, free-market, agenda, there was a growing movement of Americans becoming addicted to the government-knows-best model.  Today, half of Democratic voters support an avowed socialist, who, after reaching adulthood, thought communist-controlled Moscow was the best place to take his honeymoon in the 1970s. 

Today, the news media, excepting a single media outlet, leans closer to old style Soviet dogma than to the views of Adam Smith.  Absurd notions like making it a crime for the poor to work in New York and California are applauded by the media and young, usually wealthy, elitists. Destroying entire industries and uprooting millions of families, the coal industry comes to mind, is cheered by these anti-free market brigades.

The ideas that supply and demand should determine price and that consumer decisions should rule are being abandoned in favor of having the country produce what a small elite wants produced.  What is this model?  What happens to economic growth when what is produced is not what consumers want and when individuals are forbidden by law to work, if their skills are at the lower end of the spectrum?

In academe, increasingly, science is being replaced by political dogma.  New ideas and free speech are increasingly vanishing from the elite colleges and universities.  Admission to elite schools is now narrowly confined to the wealthiest Americans and those who are chosen on mostly political grounds to occupy the remaining few seats.  The monopoly position of academics, protected by absurd tenure rules, guarantees their status as one-percenters, while average Americans are frozen out of this locked system.

So, the next time you hear an "economist" opining on some topic or other, be on your guard. It is less and less about economics these days and more about what is politically correct in an environment that grows daily more hostile to free ideas.  This is turning economics on its head.

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