Economic Misunderstandings

The statist claim that a strong government is needed to protect the "weak" against the "powerful" is usually accepted as a matter of faith. But given just a tiny bit of thought the claim turns out to be hogwash. Dr. Donald Boudreaux, President of the Foundation for Economic Education (FEE), based in Irvington-on Hudson, New York, demonstrated that nonsense in FEE's publication, Ideas On Liberty (December 1999).

Do free markets favor the so-called powerful over the weak? Boudreaux says no. Microsoft CEO, Bill Gates's wealth is about 600,000 times greater than mine but Gates has no more power over me than I have over him. You say, "Balderdash Williams, you're up against a multi-billionaire!" Well, let's see. Can Bill Gates take my car? What about my home? Can he dictate how and where my children are to be educated? Can he force me to associate with people with whom I'd rather not associate? If I want to use Microsoft software, I must buy it from him just as if he wants me to mow his lawn or give him economic counsel, he must pay me. Of course, both of us are free not to contract with, speak to, or have anything to do with one another. So where is the power the rich have over the non-rich?

Dr. Boudreaux says, "A person (or an institution) is powerful only insofar as he can use authorized force to compel others to act against their wills." Bill Gates can't force me to do anything I choose not to do. Neither can Bill Gates imprison me for disobeying him. Guess who does have power to force people to act against their will? If you said politicians and government bureaucrats, go to the head of the class. That's why liberals curse free markets and bless government. They want power over people. Free markets and limited government restrict the power that one person can have over another.

Here's another misunderstanding of economics. Suppose I told you that the way to create more good paying jobs is to give a bunch of youngsters baseball bats and tell them to smash car windows. All kinds of jobs would be created in the auto repair and glass manufacture industries. You say, "C'mon Williams, that's crazy." You're right but look at the headline in the Wall Street Journal (9/17/99): "Hurricane Floyd May Leave Robust Economy in Its Wake." Reporter Tristan Mabry said, Hurricane Floyd "may actually have churned up some economic activity." Marilyn Schaja, chief economist at Donaldson, Lufkin and Jenrette Securities Corporation in New York, is quoted as saying "the storm may actually give the economy a boost."

Dr. Thomas J. DiLorenzo, professor of economics at Loyola College in Maryland, writing in Ideas On Liberty (February 2000), says that kind of thinking is a classic example of economic ignorance. Yes, the hurricane will create some jobs, just as smashing automobiles windows, but it will destroy others. That's because the money used for the repairs had to be diverted from other job creation uses.

Another example of this fallacy is when politicians, Chambers of Commerce and labor unions produce the self-serving argument that municipal stadia construction creates jobs. Yes, more jobs are created in the construction industry. But since there's no Santa Claus government had to tax people. Had the people not been taxed, they would have spent (invested) the money elsewhere. Where they would have spent (invested) that money, and didn't, represents jobs that were not created.

Good economics training gives us ammunition to corner charlatans, demagogues and quacks. Maybe that's why the nation's statists don't want economics as a part of our education.

Walter E. Williams
c11-00
May 10, 2000
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