Feeds:
Posts
Comments

Posts Tagged ‘Economics’

I don’t know whether to be impressed or horrified by Paul Krugman.

I’m impressed that he’s always “on message.” No matter what’s happening in America or around the world, he always has some sort of story about why events show the need for bigger government.

But I’m horrified that he’s so sloppy with numbers.

My all-time favorite example of his fact-challenged approach deals with Estonia. In an attempt to condemn market-based fiscal policy, he blamed that nation’s 2008 recession on spending cuts that took place in 2009.

Wow. That’s like saying that a rooster’s crowing causes yesterday’s sunrise. Amazing.

Let’s look at a new example. This is some of what he recently wrote while trying to explain why the U.S. has out-performed Europe.

America has yet to achieve a full recovery from the effects of the 2008 financial crisis. Still, it seems fair to say that we’ve made up much, though by no means all, of the lost ground. But you can’t say the same about the eurozone, where real G.D.P. per capita is still lower than it was in 2007, and 10 percent or more below where it was supposed to be by now. This is worse than Europe’s track record during the 1930s. Why has Europe done so badly?

Krugman answers his own question by saying that the United States has been more loyal to Keynesian economics.

…what stands out from around 2010 onward is the huge divergence in thinking that emerged between the United States and Europe. In America, the White House and the Federal Reserve mainly stayed faithful to standard Keynesian economics. The Obama administration wasted a lot of time and effort pursuing a so-called Grand Bargain on the budget, but it continued to believe in the textbook proposition that deficit spending is actually a good thing in a depressed economy.

I have to confess that alarm bells went off in my head when I read this passage.

If Krugman was talking about the two years between 2008 and 2010, he would be right about “staying faithful to standard Keynesian economics.”

But 2010 was actually the turning point when fiscal policy in America moved very much in an anti-Keynesian direction.

Here’s the remarkable set of charts showing this reversal. First, there was zero spending growth in Washington after 2009.

Second, this modest bit of fiscal restraint meant a big reduction in the burden of government spending relative to economic output.

Wow, if this is Keynesian economics, then I’m changing my name to John Maynard Mitchell!

So is Krugman hallucinating? Why is he claiming that U.S. policy was Keynesian?

Let’s bend over backwards to be fair and try to find some rationale for his assertions. Remember, he is making a point about U.S. performance vs. European performance.

So maybe if we dig through the data and find that European nations were even more fiscally conservative starting in 2010, then there will be some way of defending Krugman’s claim.

Yet I looked at the IMF’s world economic outlook database and I crunched the numbers for government spending in the biggest EU economies (Germany, UK, France, Italy, Spain, Netherlands, Sweden, Belgium, accounting for almost 80 percent of the bloc’s GDP).

And what did I find?

Contrary to Krugman’s claims, total government spending in those nations grew slightly faster than it did in the United States between 2009 and 2014.

So on what basis can Krugman argue that the U.S. had a more Keynesian approach?

Beats the heck out of me. I even looked at the OECD data on deficits to see whether there was some way of justifying his argument, but those numbers show the biggest reduction in red ink (presumably a bad thing according to Keynesian stimulus theory) took place in the United States.

But I will close by acknowledging that Krugman’s column isn’t just focused on fiscal policy. He also argues that the Federal Reserve has been more Keynesian than European central banks. My impression is that both the Fed and the ECB have been keeping interest rates artificially low, so I’m not sure that’s an effective argument (or an effective policy!), but I’ll leave that issue to the folks who specialize in monetary policy.

P.S. If you want additional examples of Krugman’s factual errors, see here, here, here, here, here, here, here,here, here, and here.

Read Full Post »

Way back in 2010, I shared two very depressing numbers to illustrate how Obama’s policies were creating “regime uncertainty.”

I shared data on the cash reserves of companies and suggested it was bad news that those firms thought it made more sense to sit on money rather than invest it.

I also shared numbers on the excess reserves that banks were keeping at the Federal Reserve and speculated that this was because of a similarly dismal perspective about economic prospects.

At the time, I figured that those numbers eventually would get better. But I was wrong.

Companies are still sitting on the same about of cash and banks have actually increased the amount of money they have parked at the Federal Reserve.

Now let’s look at some more data that doesn’t reflect well on Obamanomics.

The Federal Reserve Bank of Cleveland has some very discouraging analysis about worker compensation.

…real wages have barely risen—real compensation per hour has risen only by 0.5 percent, much less than at this point in past recoveries. The lack of strong wage growth has been one factor that has held down the growth of income, consumer spending, and the recovery. …Some longer-term changes in the economy have likely played a larger role in depressing real wage growth. …Productivity growth in the nonfarm business sector has averaged only 1.46 percent since 2004 and 0.85 percent since 2010. As the growth of labor productivity is a key determinant of real wage growth in the long run, the slowdown of productivity has probably helped to depress wage growth.

And here’s a chart from the article.

The brown line at the bottom is what’s been happening under Obamanomics. As you can see, compensation has basically been unchanged for the past five years. In other words, living standards have stagnated.

The Cleveland Fed data shows dismal earnings and productivity data for all Americans. And it’s important to understand how those numbers are related.

Some folks in Washington think that companies should act like charities and give workers lots of money simply because that’s a nice way to behave.

In the real world, though, workers get paid on the basis of how much they produce. So when productivity numbers are weak, as the Cleveland Fed points out, you also get weak data for worker compensation.

But now let’s dig even deeper and ask what determines productivity numbers. There are many factors, of course, but saving and investment are very important. In other words, capital formation. Simply stated, you need people to set aside some of today’s income to finance tomorrow’s growth.

And growth, as measured by inflation-adjusted changes in output, is entirely a function of population growth and productivity growth.

So the bottom line is that workers will only earn more if they produce more. But they’ll only produce more if there’s more saving and investment.

And this is why Obama’s policies are so poisonous. His tax policy is very anti-saving and anti-investment. And the increases in the regulatory burden also make it less attractive for investors and entrepreneurs to put money at risk.

Obama thinks he’s punishing the “rich,” but the rest of us are paying the price.

Now let’s look specifically at American blacks.

Deroy Murdock explains in National Review that they should feel especially angry at the gap between Obama’s rhetoric and performance.

Republicans should ask black Americans for their votes from now through November 2016. They should do so by challenging blacks to ask themselves an honest question: “What, exactly, have you gained by handing Obama 95 percent of your votes in 2008 and 93 percent in 2012?”

Deroy then lists a bunch of depressing statistics on what’s happened since 2009.

Here are the numbers that I think are most persuasive.

U.S. labor force participation has declined during that same period, from 65.7 to 62.7 percent. For blacks in general, …dipping from 63.2 to 61.0 percent of available employees in the work pool. For black teenagers, however, this number deteriorated — from 29.6 to 25.7 percent. The percentage of Americans below the poverty line inched up, the latest available Census Bureau data found, from 14.3 to 14.5 percent overall — between 2009 and 2013. For black Americans, that climb was steeper: The 25.8 percent in poverty rose to 27.2 percent. Real median household incomes across America retreated across those years, from $54,059 to $51,939. …such finances also reversed for black Americans, from $35,387 to $34,598. …Home ownership slipped from 67.3 percent of Americans in the first quarter of 2009 to 64.0 in the fourth quarter of 2014. For blacks, that figure slid from 46.1 to 42.1 percent.

Here’s Deroy’s bottom line.

Obama has betrayed blacks as a community, failed Americans as a people, and enfeebled the United States as a nation.

To be sure, it’s not as if Obama wanted to hurt blacks. He just doesn’t understand or doesn’t care that statist policies undermine economic performance.

And when you hurt economic growth, the folks at the bottom rungs of the economic ladder generally suffer the most, and that’s why there are so many grim statistics about the economic health of black America.

The good news is that we know how to solve the problem. The bad news is that Obama is in the White House until January 2017.

Read Full Post »

I realize it’s tax week and I should be condemning our convoluted tax code and oppressive IRS.

But I can’t resist getting diverted to another topic. It’s time to debunk the notion that there is rampant sexism in the private economy that causes women to by systematically underpaid.

I addressed the issue back in 2010, citing the solid work of Christina Hoff Summers. And I cited more of her work, as well as some analysis by Steve Chapman, when writing about the topic in 2012. The bottom line is that rigorous analysis finds that the so-called gender gap largely disappears once you consider factors such as occupational choice, hours worked, and education.

I’ll add my two cents to the discussion. For decades, I’ve been dealing with leftists who repeatedly tell me that business owners are consumed by greed and put profit above everything. Yet if women truly were making less money than men for doing equal work, then why aren’t these greed-filled business owners firing all their male employees and hiring women who will work for 80 percent of what it costs to employ men? Or 85 percent? Or 90 percent?

When I pose this question, my statist friends begin to mumble and stumble, but the clever ones eventually asset that business owners are not only soulless profiteers but also malign sexists. And the sexism apparently trumps the greed because they’re willing to employ men when equally competent women would work for less.

At that point, I usually ask them why entrepreneurs (presumably women and perhaps financed by rich leftists) don’t take advantage of a huge competitive opportunity by setting up rival businesses that could hire women for less money and lure customers away from the greedy sexist firms by charging lower prices.

I still haven’t received an answer to that question.

And that may explain why even one of President Obama’s top economic advisers basically admitted that equal-pay propaganda from the left is completely bogus.

Let’s dig into the data. Mark Perry of the American Enterprise Institute does a very good job of explaining why Equal Pay Day is based on nonsensical numbers.

…the bogus feminist holiday event known as Equal Pay Day…is a statistical fairy tale because it’s based on the false assumption that women get paid 23% less than men for doing exactly the same work in the exact same occupations and careers, working side-by-side with men on the same job for the same organization, working the same number of hours per week, traveling the same amount of time for work obligations, with the same exact work experience and education, with exactly the same level of productivity, etc. …The reality is that you can only find a 23% gender pay gap by comparing raw, aggregate, unadjusted full-time median salaries, i.e. when you control for NOTHING that would help explain gender differences in salaries… Most economic studies that control for all of those variables conclude that gender discrimination accounts for only a very small fraction of gender pay differences, and may not even be a statistically significant factor at all. …As the Department of Labor concluded in 2009, “The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.” They also concluded that “the raw wage gap should not be used as the basis to justify corrective action.”

By the way, all this data and research doesn’t mean sexism doesn’t exist. I’m sure it does, and it probably goes both ways.

I’m simply saying that unjustified discrimination in a competitive market economy is expensive. People who put prejudice above profits suffer. Which is why there’s so little actual evidence to support the feminist position.

Now let’s enjoy a bit of fun. It’s always amusing to expose statist hypocrisy.

The Obama White House claims to believe in so-called equal pay for equal work. But apparently that’s only a rule for us peasants.

And Hillary Clinton doubtlessly will regale us with speeches about equal pay over the next several months. Yet she didn’t practice what she preaches.

Yes, I realize we’re all shocked that politicians like Hillary prevaricate and dissemble.

P.S. Since this is tax season, I suppose I should close with a couple of relevant items.

First, we have an update to the infamous chart on the number of pages in the tax code.

Second, we have a new video from Reason TV about the “best tax code.”

Sadly, I don’t think my tax videos will ever be that entertaining.

Read Full Post »

With so many Americans currently filled with anxiety about their annual tax forms, this is the time of year that many people wistfully dream about how nice it would be to have a simple and fair flat tax.

Unfortunately, there are many obstacles to better tax policy. I’ve previously addressed some of these obstacles.

1. Politicians who prefer the status quo make appeals to envy by making class-warfare arguments about imposing higher tax rates on those who contribute more to economic output.

2. Politicians have created a revenue-estimating system based on the preposterous notion that even big changes in tax policy have no impact on economic performance, thus creating a procedural barrier to reform.

3. Politicians enormously benefit from the current corrupt and complex system since they can auction off tax loopholes for campaign cash and use the tax code to reward friends and punish enemies.

Today, we’re going to look at another obstacle to pro-growth reform.

One of the main goals of tax reform is to get a low flat rate. This is important because marginal tax rates affect people’s incentives to engage in additional productive behavior.

But it’s equally important to have a system that taxes economic activity only one time. This is a big issue because the current internal revenue code imposes a heavy bias against income that is saved and invested. It’s possible, when you consider the impact of the capital gains tax, corporate income tax, double tax on dividends, and the death tax, for a single dollar of income to be taxed as many as four times.

And what makes this system so crazy is that all economic theories – even Marxism and socialism – agree that capital formation is critical for long-run growth and rising living standards.

Yet here’s the problem. The crowd in Washington has set up a system for determining tax loopholes and that system assumes that there should be this kind of double taxation!

I’m not joking. You see this approach from the Joint Committee on Taxation. You see it from the Government Accountability Office. You see it from the Congressional Budget Office. Heck, you even see Republicans mistakenly use this benchmark.

This is why I organized a briefing for Capitol Hill staffers last week. You can watch the entire hour by clicking here, but if you don’t have a lot of time, here’s my 10-minute speech on the importance of choosing the right tax base (i.e., taxing income only one time).

Since I’m an economist, I want to highlight one particular aspect on my presentation. You’ll notice near the end that I tried to explain the destructive economic impact of double taxation with an analogy.

I shared a Powerpoint slide that compared the tax system to an apple tree. If you want to tax income, the sensible approach is to pick the apples off the tree.

But if you want to mimic the current tax system, with the pervasive double taxation and bias against capital, you harvest the apples by chopping down the tree.

Needless to say (but I’ll say it anyway), it’s utterly foolish to harvest apples by chopping down the tree since it means fewer apples in following years.

In this analogy, the apples are the income and the tree is the capital.

But as I thought about the issue further, I realized my analogy was imperfect because our current system doesn’t confiscate all existing capital.

Which is why it is very fortunate that one of the interns at Cato, Jonathan Babington-Heina, is a very good artist. And he was able to take my idea and come up with a set of cartoons that accurately – and effectively – show why discriminatory taxation of capital is so misguided.

By the way, this isn’t the first time that an intern has come to my rescue with artistic skill.

My highest-viewed post of all time is this famous set of cartoons that shows the dangerous evolution of the welfare state.

Read Full Post »

Free trade is a good moral concept for the simple reason that politicians and bureaucrats should not be allowed to interfere with voluntary transactions between consenting adults.

It’s also a good economic concept for the simple reason that protectionists can’t provide good answers to simple questions.

And free trade is a good geopolitical concept because it is far better than foreign aid as a mechanism for generating prosperity in less-developed nations.

Writing for the Economic Times of India, Bjorn Lomborg of the Copenhagen Consensus Center writes about the benefits of open markets among nations.

With one simple policy—more free trade—we could make the world $500 trillion better off and lift 160 million people out of extreme poverty. …reducing trade barriers not only makes the world richer, it is a great enabler for reducing poverty, curtailing hunger, improving health and restoring the environment. …Freer trade essentially means that each country can focus on doing what it does best, making all countries better off.

The good news is that global trade has been substantially liberalized. Protectionist barriers are much lower than they were a few decades ago.

Indeed, shifts to freer trade have helped compensate for growing fiscal burdens in the post-WWII era.

But we also have bad news. There are still sectors where trade taxes and other protectionist policies inhibit voluntary exchange, most notably for agriculture and textiles.

Lomborg cites data about the huge gains that would be possible if these sectors were liberalized.

The direct economic benefits would be a 1.1 per cent increase in global GDP. This sounds modest. But because it would impact the entire world economy, by 2030 we would be about $1.5 trillion richer every year. Open economies also grow faster. In the last 50 years, countries as diverse as South Korea, Chile and India have seen their rate of growth shoot up by 1.5 per cent per annum on average, shortly after liberalisation. If Doha can be completed, it is estimated that the global economy will grow by an extra 0.6 per cent for the next few decades. By 2030, such dynamic growth would make the world economy $11.5 trillion larger each year, leaving us 10 per cent more resources to fix all other problems. …By the end of the century, free trade could leave our grandkids 20 per cent better off, or with $100 trillion more every year than they would otherwise have had.

Lomborg is making the very important point that even modest increases in growth, sustained over long periods of time, can lead to huge increases in prosperity.

He correctly applies this analysis to the trade sector, but it’s a lesson that has universal applicability. It’s why we need better tax policy, a lower burden of government spending, less regulation and red tape, and better rule of law to limit government corruption.

But today’s focus is trade, so let’s look at a great video from Marginal Revolution University. Here’s Professor Tyler Cowen of George Mason University talking about the benefits of trade.

By the way, I didn’t notice it at first, but Tyler’s video doesn’t focus on international trade. He simply explains the benefit of trade among people.

But this also helps to explain why free trade across borders is good for growth. If it’s good for two people inside Virginia to engage in voluntary exchange, and if it’s good for a person in Virginia and a person in Ohio to engage in voluntary exchange, then it’s also true that it’s good for a person in Virginia and a person in Ireland to engage in voluntary exchange.

Another subtle yet important secondary point from the video is that central planning is folly because no single bureaucrat, or group of bureaucrats, will ever have the necessary knowledge (much less incentive) to properly allocate resources. To elaborate, you just listened to Prof. Cowen explain that one of the big benefits of trade is that people can specialize in things where they have a comparative advantage. And when people specialize, they develop greater knowledge in particular fields, which further increases their productivity. Yet it’s impossible for that diffuse knowledge to be centralized, much less used properly.

Which is why centrally planned economies such as North Korea, Cuba, and Venezuela are such disasters.

And this also explains why nations that normally rely on markets get such bad results when politicians take control of specific sectors of the economy. Just consider the failures of Obamacare and the U.K.’s government-run healthcare system.

But let’s get back to the issue of trade.

Politicians sometimes make arguments about “economic patriotism.” If that simply meant, for instance, that they wanted a lower corporate tax rate to make American companies and workers more competitive, that would be fine.

But as we’ve seen with Obama, language about patriotism oftentimes is a ruse to push for protectionism and other bad policies.

And one of the reasons why the protectionism-patriotism argument doesn’t make sense is that it presumes a contest among nations. Yet as Walter Williams wisely explained, trade ultimately is between private individuals.

P.S. The MRU videos are great tutorials about economics. In prior posts, I’ve shared videos explaining how taxes destroy economic value, highlighting the valuable role of market-based prices, and revealing the destructive impact of government subsidies. They’re all worth a few minutes of your time.

Read Full Post »

I’ve often complained that government-created third-party payer is the main problem with America’s healthcare system, and I was making that point well before Obamacare was imposed upon the country.

The issue is very straightforward. In a genuine free market, people pay “out of pocket” for routine expenses. And they rely on insurance only in cases where they may face large, unexpected costs.

But in our current healthcare system, thanks to Medicare, Medicaid, and the tax code’s healthcare exclusion, most of us buy services with other people’s money and that dramatically distorts incentives.

Here’s some of what I wrote about this messed-up approach back in 2009.

…our pre-paid health care system is somewhat akin to going to an all-you-can-eat restaurant. We have an incentive to over-consume since we’ve already paid. Except this analogy is insufficient. When we go to all-you-can-eat restaurants, at least we know we’re paying a certain amount of money for an unlimited amount of food. Many Americans, by contrast, have no idea how much of their compensation is being diverted to purchase health plans. Last but not least, we need to consider how this messed-up approach causes inefficiency and higher costs. We consumers don’t feel any need to be careful shoppers since we perceive that our health care is being paid by someone else. Should we be surprised, then, that normal market forces don’t seem to be working? …Imagine if auto insurance worked this way? Or homeowner’s insurance? Would it make sense to file insurance forms to get an oil change? Or to buy a new couch? That sounds crazy. The system would be needlessly bureaucratic, and costs would rise because we would act like we were spending other people’s money.  But that’s what would probably happen if government intervened in the same way it does in the health-care sector.

As you can see, I’m frustrated.

I think the system is inefficient from an economic perspective. But I’m also a consumer, and I’m very dissatisfied whenever I have to deal with the healthcare system.

Fortunately, more and more people are adding their two cents on this topic.

Here’s some great analysis on the issue by Mark Perry of the American Enterprise Institute. He starts by pointing out how prices for health care generally climb much faster than the overall CPI price level.

Between 1998 and 2014 the price of medical care services in the US (as measured by the BLS’s CPI for Medical Care Services) has increased by 88.5%, or more than twice the 45.8% increase in consumer prices in general over that period… On an annual basis, medical care costs in the US have increased more than 4% per year compared to an average inflation rate of only 2.4% over the last 16 years.

He then explains that a big problem is third-party payer, which eviscerates normal market forces.

As a result, consumers are relatively insensitive to price, which means producers and providers can charge more and be relatively inefficient.

One of the reasons that medical care costs in the US have increased almost twice as much as general consumer prices since 1998 is that a large and increasing share of medical costs are paid by third parties (private health insurance, Medicare, Medicaid, Department of Veterans Affairs, etc.) and only a small and shrinking percentage is paid out-of-pocket by consumers. According to data from the Census Bureau, almost half (47%) of health care expenditures in 1960 were paid by consumers out-of-pocket, and by 1990 that share had fallen to 20% and by 2009 to only 12%. …Consumers of health care have no incentive to monitor prices and be cost-conscious buyers of medical services when they only pay 10% themselves, and the incentives of medical care providers to hold costs down are greatly reduced knowing that their customers aren’t price sensitive.

Mark then asks what the world would look like if the free market was allowed to function. And he identifies a niche in the healthcare system where that happens.

How would the market for medical services operate differently if consumers were paying out-of-pocket for medical procedures in a competitive market? Well, we can look to the $7.5 billion US market for elective cosmetic surgery for some answers.

And the information he shares is remarkable.

The table…shows the top five most popular surgical procedures and top five most popular non-surgical procedures for 2014, the number of each of those procedures performed last year, the total expenditures for each procedure, the average price per procedure both in 1998 and 2014, and the percent increase in price since 1998 for each procedure. …For the top ten most popular cosmetic procedures last year, none of them has increased in price since 1998 more than the 45.8% increase in consumer price inflation…, meaning the real price of all of those procedures have fallen over the last 16 years. …For three of the top five favorite non-surgical procedures in 2014 (botox, laser hair removal and chemical peel), the nominal prices have actually fallen since 1998 by large double-digit percentage declines of -23.6%, -31.2% and -30.1%.  …none of the ten cosmetic procedures in the table above have increased in price by anywhere close to the 88.5% increase in medical care services since 1998.

Here’s Mark’s chart, and I’ve circled the relevant bits of data.

Just in case it’s not obvious, Mark then draws the should-be-obvious conclusions from this data.

Simply stated, when people spend their own money, they are careful shoppers. And when consumers are careful shoppers, that leads to competitive pressure on producers and providers to be much more efficient.

The competitive market for cosmetic procedures operates differently than the traditional market for health care in important and significant ways. Cosmetic procedures, unlike most medical services, are not usually covered by insurance. Patients paying out-of-pocket for cosmetic procedures are cost-conscious, and have strong incentives to shop around and compare prices at the dozens of competing providers in any large city. Because of that market competition, the prices of almost all cosmetic procedures have fallen in real terms since 1998, and some non-surgical procedures have even fallen in nominal dollars before adjusting for price changes. In all cases, cosmetic procedures have increased in price by less than the 88.5% increase in the price of medical care services between 1998 and 2014.

That last sentence is the key. Because of third-party payer, overall health care expenses have climbed about twice the rate of inflation.

For cosmetic surgery, where normal market forces operate thanks to an absence of government-imposed and government-subsidized third-party payer, prices climb slower than overall inflation.

Here’s a video, produced by the Center for Freedom and Prosperity, on the problem of third-party payer.

As you can see, Obamacare made the problem worse, but it’s just one small part of a really big problem caused by decades of government intervention.

P.S. The video expands upon the analysis provided in a previous CF&P video.

P.P.S. Setting aside the debate about whether it’s right or wrong, the abortion market also is an interesting case study of how prices don’t rise when consumers pay out of pocket.

P.P.P.S. Government-created third-party payer also is screwing up the market for higher education.

P.P.P.P.S. Mark Perry not only is a good economist, as you can see above, but he’s also a brave guy for being willing to antagonize feminists.

Read Full Post »

What’s the most important factor for economic progress?

There are several possible answers to that question. We can take a big-picture view and argue that the key is free markets and small government, and there certainly is lots of evidence in favor of this assertion when you compare countries over time.

But what if we narrow our focus and try to identify, for instance, the key characteristic of a free market. At times, I’ve highlighted the importance of both property rights and the price system.

Private property gives people the right incentives to both produce and conserve, a lesson learned early in American history.

An unfettered price system is a mechanism that best ensures resources are efficiently utilized to serve consumers.

But we need to augment this list by also including the valuable role of the profit motive.

This Prager University video, narrated by my friend Walter Williams, succinctly explains the issue.

I especially like the section where Walter asks what institutions and entities leave us happy and contented. The answer, at least for most of us, is that we’re more likely to be satisfied in our dealing with private companies operating in competitive markets.

That’s because the profit motive gives them an incentive to treat us well, both to boost their reputations and so we’ll be repeat customers.

Simply stated, in a true free market, entrepreneurs, investors, and business owners can only become rich by providing consumers with things that make our lives better.

But our dealings with government (or government-enforced monopolies like cable companies) tend to be less rewarding, whether it’s because bureaucrats are taking our money, bossing us around, or simply treating us poorly.

So the next time some politician or pundit complains about “evil profits,” just remember Walter’s wise words from the video.

P.S. I’ve shared two other videos from Prager University, one of the Laffer Curve and one about statist policies and the Great Depression. They’ve both very much worth watching.

P.P.S. It goes without saying (but I’ll say it anyhow) that profits are only admirable if they’re earned honestly. There are fraudsters in private markets who rip off consumers and there are crony capitalists who use coercive government policies to line their pockets. These groups deserve disdain and punishment.

P.P.P.S. Walter Williams is one of America’s best public intellectuals. I’ve cited his work numerous times, but your first stop, in learning more about him, is this video from Reason TV.

Read Full Post »

Older Posts »

Follow

Get every new post delivered to your Inbox.

Join 2,731 other followers

%d bloggers like this: