Monday, August 24, 2009

Our Catch-22

"The mistaken assumption of zero-sum economics is self-fulfilling. If people believe that their gain must come from someone else's loss, they seize what they are able; and if they can do it under cover of the law, they do it with impunity. A society imbued with this vision of economic life finds taking what others have to be more rational than producing what others need in return for fair payment. Thus, stagnation and injustice are reinforced." page 282

"Those who think that distribution can be separated from production lead us to the same place. "We produce plenty for everyone. We only need to redistribute it so that there is more equality." But redistribution changes production. People do not willingly produce goods they know will be seized for the benefit of others. The redistributors will find that there is less to redistribute, for a redistributionary economy is less than zero sum. It is a negative sum. Armed robberies are zero sum because their adventitiuos nature does not induce people to modify their behavior in anticipation of such an unlikely event. But the predictability of redistribution makes it sensible to reduce both investment and production in order to provide less for the tax collector. People consume more and hoard more, work less, save less, and invest less. Thus, redistribution is literally destructive of the nation's wealth, dismantling capital resources and providing disincentives to replace them."

As the social democracies sink into economic decrepitude, the neo-Malthusian laments seem to gain greater influence. We are becoming poor, they say, not because of what we are doing, but because the earth is becoming depleted, because there are too many people, because production cannot be increased without increasing pollution. Thus, we will need more state controls to save us. Since this mistakes the agent of decline for its remedy, it can only hasten the deterioration. The energy crisis of the 1970s almost wholly caused by federal price controls and allocation blunders, will likely be the paradigm of the entire economy for the remainder of the century." pages Idols For Destruction 282-283

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