As the election nears, politicians will more and more frantically point out what wonderful favors they've done for the voters - or what favors they will do for the voters, if elected...
Of course, they never mean all the voters. They mean groups or individuals within the voting population who believe they benefit from laws, taxes, regulations, and spending programs supported by the politician in question.
Two such examples of these sorts of favors are tariffs and minimum wage laws. Both impose costs on both producers and consumers overall, while benefiting a small sliver of the population that is able to take advantage of the government mandate.
The economics of each of these, or taxation and business regulation in general, have already been addressed numerous times in these pages.
It must suffice to point out that these policies, for which politicians think they deserve accolades, potentially benefit only very specific interest groups. Nevertheless, these policies can prove to be politically popular, and may help a politician get elected.
But why should policies that help so few - and impose many costs on even those they purport to help - be politically popular?
Hazlitt and Mises on the Popularity of Bad Economics
Answering this question was one of the main reasons that Henry Hazlitt wrote his perennially popular bookEconomics in One Lesson.
In the very first chapter, Hazlitt notes that economic science is prone to so many errors because people are motivated to believe an incorrect version of economics that supports their own economic interests. Or as Hazlitt put it, economic errors "are multiplied a thousandfold ... by the special pleading of selfish interests."
Sometimes, these attempts to throw good economics in the garbage are spectacularly successful. After all, for decades, no insignificant number of Americans believed the claim that "what's good for General Motors is good for America."1
While every group has certain economic interests identical with those of all groups, every group has also, as we shall see, interests antagonistic to those of all other groups. While certain public policies would in the long run benefit everybody, other policies would benefit one group only at the expense of all other groups. The group that would benefit by such policies, having such a direct interest in them, will argue for them plausibly and persistently. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.
In other words, it's amazing what you can get people to believe with the right ad campaign or lobbying campaign.
Ludwig von Mises also defined the problem in his book Theory and History, noting that the common good (which he called the common weal) was most certainly not the same thing as the good of the special interests. Nevertheless, many (bad) economists, Mises tells us, have tended to support policies that benefit whatever group the economists happen to like:
People aim at definite ends when resorting to a tariff or decreeing minimum wage rates. When the economists thought such policies would attain the ends sought by their supporters, they called them good.
The real job of an economist, however - according to Mises - is something else:
In dealing with [economic policies] ... economics ... merely investigates two points: First, whether or not the policies concerned are fit to attain the ends which those recommending and applying them want to attain. Secondly, whether these policies do not perhaps produce effects which, from the point of view of those recommending and applying them, are undesirable.
When politicians support minimum wages or tariffs, they usually frame these policies as being beneficial to nearly everyone. (This is why headlines like "Raising the minimum wage would benefit everyone" are so common.) Meanwhile, both Mises and Hazlitt would maintain, drawing on sound economics - and not even using the empirical evidence which backs them up - that these policies harm nearly everyone and benefit only a few. Moreover, the benefit enjoyed by that small minority may even extend only to the short term, or may even be negative when the bigger picture is considered.
As Hazlitt notes, it is the job of the economist to consider all of these angles and options, and thus economists do their job when explaining how and why minimum wages and tariffs don't "attain the ends" which their supporters claim.
The Problem with "I'm Willing to Pay a Few Bucks More..."
Confronted with the simplicity and basic common sense of the economic arguments, advocates for minimum wage hikes and tariffs often fail to get the support they like. To counter this, they employ a different tactic.
When economic arguments fail, supporters of these policies then claim that "well, I am willing to pay the price of adopting the interventionist economic policy in question because...." suggesting that the cost is low, and that there is a moral imperative to adopt their interventionist point of view.
This is how it works: Economist A points out to Activist B that a tariff raises the price of goods, thus making products and services more expensive for entrepreneurs and producers who use those goods. This leads to fewer goods being available on the market, fewer choices for everyone, and higher prices to boot. Activist B then responds: "well, maybe the tariff will make prices higher, but I'm willing to pay that price because the Chinese are cheating us! Beating the Chinese is worth a few bucks more on widgets!"
But here's the rub: when Activist B says "I'm willing to pay that price" what he is really saying is that he's willing to have you pay more for the goods and services affected - whether you like it or not.
And if you're not happy to pay more in order to "beat the Chinese," (or whatever) well, then that's just tough luck. The fact that the tariff might be slashing profit margins at your small, family-owned steel-fence manufacturing firm means nothing to them. The fact that a higher minimum wage might force you to close your family restaurant is equally of no concern. They're willing to pay the price of adopting the policy they want, so you are expected to do the same since, in their minds, the good of their own interests - whether they be economic or moral - trumps the interests of everyone else.
Ultimately, this is nothing more sophisticated than the belief that the police power of the state ought to be used to force economic policies on everyone to satisfy the whims of a few. It's nothing more than good old-fashioned mercantilism. Many good economists, thinking they had thoroughly discredited mercantilism 200 years ago, continue to be dismayed that a sizable portion of the voting public continues to be hoodwinked by it all. But, if history is any indicator, mercantilism never really stopped being popular.
[Ron: The implication that there can be "good" economics, as posed by this article and its references to Hazlitt and Mises, is bogus. It implies that the money meme, which was invented by criminal cabals millenia ago, is a valid mechanism for healthy, happy and abundantly wealthy human life for ALL. It isn't. Rather, the money meme and the propaganda about banking and so-called economics that is associated with it, has been rightly said to be the source of all evil in our world.
The money meme prevents us from realising that we are sovereign fragments of the Creator of ALL that IS and hence that we are destined to become ONE with everyone and everything.
Our current global dystopia is founded upon the false belief that humans need money to live. They don't. Prosperity and abundance depend on the creation of productive wealth by humans co-operatively using their ingenuity and labour, AND sharing the resulting production. Money is merely a convenient mechanism for facilitating the exchange of goods and services BUT it doen't create those goods and services, PEOPLE DO. Accordingly, the beloved doctrine of "good economists" that production of goods and service requires BOTH capital (ie money) and labour is false.
The money meme has caused most humans to become alienated from self and society because it has convinced most people to believe that they must sell their intellectual efforts, behaviour and appearance, and labour (ie themselves), for money. That causes people to think of themselves as commodities rather than sovereign beings who are meant to become ONE with the Creator and all other beings.
Every conventional economic, ie money based, “solution” to the systemic ills of our so-called global "economy" and society boils down to some version of acquisition of free money. Typically this is generally being touted as Universal Basic Income (UBI) schemes – free money for everyone, funded by borrowing from future taxpayers (robots, people, aliens, any fantasy will do) and debt jubilees funded by central banks creating trillions out of thin air, a.k.a. free money, and so on. The problem, of course, is that creating free money is not the same as creating new production and new wealth. After all, "money"is merely a fiction created by banksters out of thin air by key strokes on computers.
Humanity's current dystopic problems cannot be solved using the flawed level of thinking that created them. Humans are spirit beings having a physical experience. Essential human characteristics are the possession of mind (thinking ability) and free will; and the aim of physical incarnation by spirit beings is to learn about life, the universe and everything in order to eventually graduate to Oneness with the Creator.
What is required to permanently resolve our so-called global economic problems is an increase in spirituality that debunks the money meme and the materialism it fosters, which constitute the root cause of the seperation, isolation and consequent ego-centric, materialistic, individual and societal orientations that cause the conflicts and dystopia in which we live. This anti-personal and anti-social orientation infects almost ALL of the global population, not just the 99%+ that are debt slaves, but also the mega banksters and corporatists and their minions who constitute our global manipulators and slave masters.
This solution to global poverty requires a radical redistribution of the fruits of global human productivity and that requires an increase in individual and community consciousness globally that will result in a spiritual renewal in which individuals focus on service to others more than self. That increase in consciousness is underway NOW due to increasing awareness influenced by technological changes like the internet; and increases in incoming energies from the centre of the galaxy. Those who respond positively to these changes will remain with this planet after the coming Three Days of Darkness (3DD) and Earth Changes. The increased consciousness of these humans will, in due course, result in improved attitudes to life, the universe and everything which will translate into a moneyless, caring and sharing global society, and elimination of false Talmudic economic, cultural and social doctrines. So be it.].