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No. 11: On Thinking Economically

  • Kantbot

  • January 28, 2014

I find Progressives to be some of the most economically illiterate people there are. Free markets are a much more positive force for social change than liberals give them credit for, in 17th century England, for example, <10% of the population was literate, by 1789, upwards of 80% of people could read. In those days, in the 17th century, under Cromwell and in the wake of the Restoration, print was heavily regulated by the State, until 1692 when the Licensing Act expired. Before then the number of printers in London was capped to something like no more than twenty, and there was also a Government created Monopoly, The Stationers Company, which you had to buy into to be able to legally sell printed material, in the 18th century this regulatory infrastructure fell apart, and the result was an 800% increase in literacy. Competition among printers caused the price of printed material to fall, and people actually learned to read, not because the State sent everyone to Public school and taught them, but because there were things they wanted to read and the decreasing price made books more affordable, this in turn led to a reciprocal increase in demand, which then, in turn, led to more print shops and more competition and lower prices. There was no journalism in the 17th century, journalism is an 18th century invention, because it was only in the 18th century that printed material became cheap enough for a profitable newspaper or periodical to exist. The Novel genre itself, is, in many ways, a direct result of this transformation of literacy in the 18th century.

In our own time, I would say both the music industry and the film industry are two examples where the market was ahead of Progressive politics, in that something like the music industry actually led the way in racial integration before politics got around to racially integrating the Government and Laws. The ideal of economic liberty is that of public self-determination, today Progressives wield the State as a force for (what they say is) the good of “Society”, and they try to use it to engineer outcomes, but economic liberty is the only thing that can truly allow “The People” to determine themselves, and isn’t that a good thing? Isn’t that the whole idea of our country? That only the People, and not the State, should have the power to determine the society we all make up together?

Part of the problem is that Progressives generally struggle with thinking abstractly when it comes to economics. I’ve noticed that your typical liberal-Democrat can only think about an economic issue by counting on his fingers so to speak, by using an aid, that of a completely hypothetical individual he creates in his imagination, who he uses to decide whether or not a given economic proposal should be supported or not. He dreams up this hypothetical “average” person, and he imagines how a law or plan would affect such a person should it be carried out, and based on this sort of speculative exercise, he then passes judgment on the proposal as to whether or not it should be implemented.

An analogy I like to use here to show the limitations of this way of thinking, is that of the difference between integrating the area under a curve manually, and using the fundamental theorem of calculus to do so. The Progressive uses his hypothetical “average” people, who remember only exist in his head, and he lines them up next to one another under the curve like rectangles, one after the other, but he can never capture all the area by doing it this way, that area here representing productivity, or jobs or what have you. In genuine economic theory, being able to think about economic issues in a purely abstract way, allows you to capture all the area in a way you can’t otherwise.

What I mean is that, the typical liberal-Democrat is going to hear a discussion about jobs, and he is going to be limited in his thought to understanding a job as something very definite, a job is indivisible, its something you can have, he thinks about his hypothetical “average” person and wants to make sure that he has one (1) job, one job for one person, 300,000,000 people, 300,000,000 jobs. The economist understands labor much more abstractly, and as a result, much more dynamically as well, you can’t just line up the whole population under the curve and try to squeeze them all in, the reason you can never get everyone to fit doing so is because you’re missing out on all this area, all these little pockets between the corners of the rectangles. The problem with minimum wage laws, in this example, is that they don’t actually increase the overall sum amount businesses spend on labor. Wages are a part of what businesses spend, certainly, but there’s much more that goes into it than that.

A minimum wage increase doesn’t increase the demand companies have for labor, businesses aren’t going to spend more overall purchasing labor in the marketplace than they did before the increase, they’re going to spend the same amount, and when you force them to spend more on wages, they’re going to look to cut exactly the amount you increased the minimum wage elsewhere. They might offer fewer benefits, they might slow the rate at which they expand their labor force, they might shift away from full-time workers to temporary hires, they’ll look for more long-term solutions to their labor needs in automation, they’ll raise productivity quotas and expect the workers they do have to be more efficient and work harder than they did before. You may have seen the stories about the Amazon warehouses, and how stressful and awful those kinds of jobs are, that’s what comes out of trying to dictate how much companies spend on labor through regulation and minimum wage increases, the company just hires fewer workers and imposes stricter demands on a smaller workforce.

Thinking about economic issues abstractly allows you to see all the complexity of the situation, but Progressives tend to really have a hard time of it, like I said. An economist understands the implications of the fact that the net present value of Social Security is negative, the typical liberal voter however is stuck thinking about the hypothetical “average” person collecting Social Security, and doesn’t understand the bigger picture. I don’t subscribe to any political or economic ideology really, as far as the objective libertarian party or organization is concerned, I don’t consider myself to be a libertarian, but Progressives really irk me because they simply don’t understand economics as well as they pretend to.

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