Fun with Kool-aid drinkers
It's always fun, as well as somewhat sad, to read the latest from our local Kool-Aid drinkers when economic reality is beginning to impose on their cherished heroes and beliefs. It doesn't take a genius to understand that our economy is in deep trouble and even the drinkers know that something is wrong, but it appears that all many of the drinkers can do is blame the Republicans.
Now don't get me wrong: many of the Republicans are indeed morons, but the problem goes far deeper than the assignment of blame onto a particular political party that happened to hold power within a given time.
The problem has to do with the wrong fundamental premises, in terms of philosophy and economics, held by members of both political parties and the people who elect them. In the economic realm it is the evil of Keynesian economics vs. the good of Misean economics. Unfortunately I doubt that our Kool-Aid drinker of last week's opinion page even knows the difference between the two, and this is the crux of the problem.
Our drinker of last week is like a blind man flailing against dark and powerful forces of which he has not the slightest clue. And worse yet, at some point, he will vote.
In what I believe is a first in letters to the editor, I will highly condense the truth and the good of an entire economic system in one lesson. I urge parents to cut this letter out of the paper and save it as a teaching tool for their children. This is necessary because the children will never hear anything about Misean economics in the public school system.
So without further ado, here is the economic wealth cycle of Ludwig von Mises in one lesson:
(1) The human desire for material wealth and the limited availability of labor creates
(2) The desire for increased capital spending relative to consumer spending. Capital spending increases production per unit of labor as long as
(3) Government pursues a policy of laissez faire; that is, government spending is limited to the defense function (i.e., the military and justice system).
(4) Capital spending increases the output of labor and reduces the man-hours needed per given unit of output; this will generally raise wages by increasing the skill of labor required and/or reducing the cost of goods produced.
(5) Increased production causes increased demand (Say's Law) and freed man-hours are now available for other capital industries, causing a further rise in production.
(6) Increased wealth induces the desire for even more kinds of wealth and the cycle of rising prosperity begins again (go to 1).
Now, I do not have the space in this short letter to expand on every point above and on a subject on which volumes of books have been written. But I will point out that the phrase in point 1 referring to 'the limited availability of labor' may seem strange to many people in our current economic environment of high unemployment.
The reason is that we really do not live in a truly free economy (make note of point 3) where labor would be in high demand. We live in the society of Obamanomics, a variant of Keynesian economics.
Under Keynesian economics the simplified explanation would be to reverse the six points above. For example, under point 5, the Keynesian would stupidly believe that 'demand creates production.' Where the 'demand' comes from is never explained.
So parents, please make of copy of these points for your children and have them commit them to memory. Later they will perhaps have the opportunity to come to understand them. You'll be doing them, their future and your country a big favor.
Roy A. Fuller, Scappoose