Late as usual, no apologies. I read my chapters of Economics in One Lesson in time for last week’s discussion, but like the government, I’m a (few) day(s) late and a dollar short, give or take a trillion.
In the latest installment of our economics lesson(s), I admit to flagging a bit and feeling like Mr. Hazlitt was a broken record, changing scenarios but repeating the same mantra. Then it came to me: in spite of this book having so many short chapters, it truly is ONE lesson. The primary lesson is that when the government gets involved in improving our economic lot, things don’t get better, they get worse, because there are always negative consequences to the so-called positive actions that politicians pursue. We must always ask, “Where is the money coming from for this program?”
It doesn’t matter how good the cause seems to be. If we are robbing Peter to pay Paul, we are still thieves. It helps to remember that in spite of the supposed complexity of this subject, which helps tax-paid economists to pull the wool over our eyes more easily, macroeconomics (or, economies on a large scale, such as our national economy which is currently in a greater crisis than usual) ought not to function on principles much different than microeconomics (or, your household or small business budget). Live within your means is good advice for everyone.
I won’t get into trade imbalances made worse by export subsidies, price parity, price-fixing, etc., except to say that as I read about the many hands being held out for their “fair share” of the pork belly, all I could think of was Willy Wonka and Veruca Salt saying, “I want it, and I want it NOW!!” Some of the others in this discussion did some fine analysis of those things.
This morning, feeling the pressure to blog about this before the next chapters are being discussed beginning tomorrow, I did think of one other thing. Statism happens when someone, somewhere cries, “Somebody needs to DO something!” Rather than letting people take personal responsibility for their actions, or allow the natural consequences of economic decisions to occur, it is usually the government that steps in to be the man on the white horse. The result of that interference is not salvation, but resembles more one of the four horsemen of the apocalypse. In economics, in an attempt to alleviate suffering, usually more suffering occurs due to totalitarian tinkering than would have happened if things were allowed to run their course. Austrian economists say this is the economy “correcting itself.”
In our personal life we have lived through this on a small scale, though it seemed big to us at the time. We had no white horse rescue, and for that we are grateful. Steve had a small business with several employees, and we were doing quite well. We lived in a very large house in an upscale part of the south Bay Area, with a very large mortgage. We bought it six weeks before the big Loma Prieta earthquake, which sloshed most of the water out of our swimming pool but didn’t do any damage to our house. Like the apocalypse, it was a precursor to further tribulations, however. Bush, Sr. had forgotten to look in the mirror when he told America to “read my lips,” and his tax raises had the consequence of plunging the country into a recession. We had bought our house at the peak of the market; now house prices were plunging, but our adjustable rate mortgage was climbing. On top of that, Steve’s business began to fall off and he lost his biggest client, while still needing to meet a payroll. To make a long story short, we eventually lost our house, when I was pregnant with our sixth child.
Boohoo. Don’t you feel sorry for us? Don’t you think we should have gotten some tax-financed assistance to help us through that tough time, so we could stay there and continue our life of conspicuous consumption? Well, we had to fend for ourselves, and that meant moving. I have memories of watching groceries in the cupboard dwindling while we were trying to figure out where to go and how we could afford to do it. We sold anything that had value, scraping together enough to rent a moving truck. It was the best thing that could have happened to us.
Our family economy got “corrected,” but it didn’t do it all by itself, it was God’s providence that corrected it, and He corrected us in the process. He began to show us what was truly important, and it wasn’t big houses with swimming pools and fancy cars. It was being with our family and seeking His will first. It was knowing that He was our provider and that we needed to trust Him more and our “stable job” less. That incident was the impetus to move us out of the city and to our present rural location, something that has been a great blessing to us, though we might not have done it unless forced to leave that expensive area. We wouldn’t have chosen to go through that financial hardship, which lasted for a few years as we had to deal with debt and reorganize our lives, but it was the best thing that could have happened in the long run. Short term rescues don’t usually make long term solutions, in the micro or the macro.
Well, that’s my personal application of this week’s lesson. Before I end this, though, I must encourage you to read this humorous letter which I thought of when reading about government programs for stabilizing commodities. It puts it all in perspective, and I think anyone can understand it. A little bit of humor helps the economics go down.
