Free to Choose, or, Economics is Stupid

“It’s not my fault your species decided to abandon currency-based economics in favor of some philosophy of self-enhancement.” – Star Trek, Deep Space 9

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The Boy, when you won’t buy his feathers.  

It’s amazing how it can take a lot years of study to state something that’s blindingly obvious.

Economics is one of those sciences that does exactly that.  It took an Austrian, Carl Menger, until 1871 to state a fact which most of us take to be blinding obvious – people value things differently.

Let’s take Pez©.  Everyone thinks that Pez® is roughly worth its weight in gold, and, should we need to give our gold to the aliens of Zontar-7 so they can make a gigantic gold Pez™ dispenser for their harvest god, well, instead of gold we could use Pez©.

Wait, not everyone thinks that Pez® is as valuable as gold?

Menger came up with the concept that, in a free exchange, both sides of a deal walk away happy.  When I go to Wal-Bart, I trade them dollars for steak.  They want the dollars more than the steak.  I want the steak more than I want the dollars.  We both win!

I know that sounds obvious, but this one bit of philosophy is the foundation of an entire political movement, libertarianism.  I know it sounds like I’m joking, but I’m not.

Let’s take Marxism, the whole communist philosophy thing.  Karl Marx (another Carl? What IS it with that name?) said it all a bit differently, and, history shows, a lot more stupidly.

Marx said, essentially:  an object was worth the amount of labor and material that went into making it.  Only a fool would make the obvious joke about polishing a poop . . . but that’s exactly what Marx said.  Okay, he didn’t make an explicit joke about a poop.  But the philosophy still stands . . .

If you spent a million hours of labor in polishing a poop perfectly, it’s still a poop.  But that poop represents the labor and hours and investment of good Soviet Men!  So they must be accounted that way.  The free market allows for profit!  Which is also bad, because it’s MORE than the cost of production of the item.  But it’s just philosophy, right?

And that philosophy resulted in the Soviet Union, Communist China, Cambodia, North Korea, and Viet Nam.  Oh, and at least 94,000,000 dead.

The practical impact of that philosophy was felt in the USA, too.  In the 1970’s, in response to rising gasoline prices (due to the OPEC oil embargo), the price of gasoline was limited to a maximum price.  So, gasoline prices went up, but not as much as a free market would have driven them.  The result?

Long lines at gas stations.  If you were a typical driver, you needed gas to get to work.  Your boss then (as now) had zero sympathy for you not having gas.  So, you got in line at the gas station, waiting to get gas as soon as the truck showed up and filled up the station’s tanks.  But pretty soon everybody had the idea, and the lines for gasoline wrapped around city blocks.  Then rationing started – only even numbered license plates could come in on Tuesday.  And odd numbered plates on Wednesday.  And non-binary transgender plates on Thursday.  You get the point.

You and I might think that this idea was put into place to drive the public crazy, but it was supposed to help us.  When Ronald Reagan became president, he dumped this crazy Nixon-era idea, and then . . . lines stopped.  The price of gasoline went up, it went down, but nobody had to face a line at the pump.

And Menger started that revolution, simply by stating what you and I know to be true:

A thing is worth . . . exactly what someone will pay for it.  And in a free transaction?  Everybody wins.

Let me give another example:

The Boy was going to second grade.  For whatever reason, they made feathers out of construction paper.  In whatever fever-induced-second-grader dream he was having, I was supposed to buy, with real money, these feathers from him.

If you’ve never had a seven-year-old screaming at the top of his lungs, “BUY MY FEATHERS,” well, you’ve never lived.

The Boy was also pretty sure about the price he wanted.  He wanted two dollars for each construction paper feather, and demanded I buy five of them.  DEMANDED!

Normally, The Boy has, was, and is reasonable.  On this day?  He was a screaming pile of id, demanding payment.

In a rational, calm voice, I tried to negotiate.  “How about a dollar a feather.”

“NO! TWO DOLLARS!  BUY MY FEATHERS!”

“How about I buy one of them?”

“NO! BUY THEM ALL!”

It started to feel like negotiating with a cop over a ticket for not stopping “enough” at the stop sign, or the IRS about not paying them “all” of the money they said I owed them.  There was no rational basis for this.  Just like Marx, The Boy saw only one value for the feathers, and that was the value he put on them.

So, in his mind, I was to buy a set quantity of a thing, for a price that he dictated.

He should be in government, thus endeth example the second.

But when you look at the counter example, I can recall that almost every transaction where I’ve bought something, sold something, or traded something for something else, I’ve come out happy.  And so have they.

Sure, I didn’t want to pay a lot of money for electricity for air conditioning while I lived in Houston, but that was way better than living in Houston without air conditioning.  I had a choice.  And when I bought that Battlestar Galactica Original Helmet©, complete with signatures from Apollo™ and Starbuck™?  Yes.  Totally worth it.

In a free market, people are free to choose.  I get to choose my own purchases (most of them, thank you IRS, Social Security, Medicare).  When businesses are free to choose, they can choose to serve me or not.  Thus came, from this simple economic idea, an entire political idea – I can choose what schools, what kind of light bulbs, what size of toilet tank, and almost every aspect of your life.

In the year 1900, your involvement with the federal government would have consisted of going to the post office.  That was (pretty much) it.

Now?  You get up, brush your teeth with an FDA approved toothpaste, shower in water covered by several federal laws, in a shower where the valve is regulated to work a certain way, and then dress, go to your car (as approved by several governing bodies, including the EPA and the NHTSAA) and turn onto a road paved with federal funding.

All of this before you get to work!

I’m not saying that I think the end result of all of those laws was bad, but they do limit our freedom to choose our own path.  And that adds cost, removes our choices and makes us all poorer.

Except for The Boy.  He apparently can set his own price for construction-paper feathers.

Author: John

Nobel-Prize Winning, MacArthur Genius Grant Near Recipient writing to you regularly about Fitness, Wealth, and Wisdom - How to be happy and how to be healthy. Oh, and rich.

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