As an economist, whenever I hear the word shortage I wait for the other shoe to drop. That other shoe is usually price control.
Put in different terms, profit is the price paid for efficiency. Clearly, the increase in efficiency must be greater than the profit, or else socialism would in practice have resulted in more affordable prices and greater prosperity, as its theorists hoped, but the latter never materialized in the real world.
For intellectuals in general, where the primary constraint is peer response, rather than empirical criteria, currently prevailing attitudes among peers may carry more weight than enduring principles or the weight of evidence.
There are too many people, especially among the intelligentsia, who will never appreciate the things that have made this country great until after those things have been destroyed – with their help. Then, of course, it will be too late.
Black votes matter to many politicians – more so than black lives. That is why such politicians must try to keep black voters fearful, angry and resentful. Racial harmony would be a political disaster for such politicians. Racial polarization makes both the black population and the white population worse off, but it makes politicians who depend on black votes better off.
But what can any society today hope to gain by having newborn babies in that society enter the world as heirs to prepackaged grievances against other babies born into that same society on the same day?
The idea of rescuing oppressed minorities ignored the prospect – since become a reality – that oppressed minorities who became rulers of their own nations would immediately begin oppressing other minorities under their control.
Economists who looked at the real consequences of a centrally planned economy came to a very different conclusion: that” there are too many economic relationships, and it is impossible to take them all into account and carefully coordinate them.
In 21st century China, seven times more energy is used than is used in Japan to produce products of the same value. In this case, the gigantic differences in efficiency have also meant gigantic differences in the standard of living of millions of human beings.
Because immobility is the key to exploitation, fixed capital, like labor, can also be exploited in the short term. And, since some capital goods can last longer than the average life span of a worker, once a hydroelectric plant has been built, both local taxes and local unions can absorb much of its profits, to the point of making very difficult that someone is ever willing to build another hydroelectric plant in that jurisdiction.
Since democratic elections are always held in the short term, politicians have every incentive to extract as much wealth as possible from the fixed capital under their jurisdiction, whether through taxes, the imposition of charges on property or of the expropriation. Only public awareness of the long-term consequences can limit this form of exploitation.
The success of politicians does not depend on their learning their lessons about history or politics, but depends much more on having the ability to act on what is widely believed by the public and the media, which may include theories conspiracies or the belief that the higher prices are due to deception or greed.
In summary, a policy intended to make housing more affordable for the poor has resulted in resources being redirected to the construction of houses that are only affordable for the rich or wealthy, since generally, luxury homes are not subject to rent control, and neither are office buildings and other commercial properties. This illustrates, among other things, the crucial importance of making a distinction between intentions and consequences.
One of the reasons for the political success of price control is that part of its costs are hidden. Even the dire consequences of the shortage are unable to show the whole picture.
One of the main problems of price control is to define the appropriate price of what is being controlled.
One of the greatest defects of the economies run by political authorities, whether under medieval mercantilism or modern communism, is that the vision and insight that emerges among the population does not carry enough weight to force the authorities to change the the way they do things.
Price controls and the direct allocation of resources by political institutions require much more explicit knowledge on the part of a small number of planners than a market economy requires so that it can be coordinated by prices to which millions of dollars respond. people based on first-hand knowledge of their own circumstances and preferences, and the relatively low prices that each individual must handle.
To understand most of the discussions about economics that take place in the media and in politics, all you need is to know the most basic economic principles. However, most of the people are unaware of them, including politicians, journalists and many academics from other fields.
Given the scarcity of mental resources, an economy in which knowledge and vision have such a decisive advantage in market competition is an economy that has great advantages in creating a high standard of living for the general population. A society in which only members of a hereditary aristocracy, a military junta or a single political party in power can make great decisions is a society that wastes much of the knowledge, vision and talent of the majority of its members. own people.
The political left’s attempts to silence ideas they cannot, or will not, debate are a confession of intellectual bankruptcy.
The challenge of determining the net balance of numerous windfall advantages and disadvantages for one individual at one given time is sufficiently daunting. To attempt the same for whole broad-brush categories of people, each in differing stages of their individual life cycles, in a complex and changing society, suggests hubris.