Your Opinion: Economics is study, not control
Monday, July 25, 2011
Economics is the study of the use of scarce resources which have alternative uses, by Lionel Robbins, a distinguished British economist.
The private sector handles marketplace stability quite well with profit and loss information. Feedback is required for the stability of any system and the private marketplace, not government, provides such feedback. We live in the age of information and the fastest most accurate information needed by consumers comes from use of their own money as they buy or not buy, and sell or not sell, products or services.
If the subjective stability desired is not in keeping with what is really happening in the marketplace we have another case of fantasy vs. reality. Fantasy is letting government try to stabilize the marketplace with laws or regulations that eliminate real world feedback. Liberals just need to eat their peas and accept reality. Crests and troughs exist in the real word. Not teaching citizens to expect and prepare for real world oscillations is cruel.
Government intervention in the private marketplace with rationing, price controls, rent controls, wage limits, etc. instantly obliterates feedback needed by consumers to make appropriate choices and destabilizes the private sector. Many monopolies were never guilty of predatory actions but lawmakers assumed companies could become guilty to justify antimonopoly laws.
Forced enactment of utility type monopolies occurred merely due to coordination and safety problems associated with multiple common service utilities attempting to occupy the same space at the same time. Fast accurate feedback is not available to such organizations such as government and regulated utility companies. Wastefulness simply occurs in regulated industries and government because neither has a fast accurate method to obtain useful feedback. If feedback lacks either quickness or accuracy, feedback is defective and wastefulness occurs. If feedback lacks both quickness and accuracy, wastefulness just trends rapidly upward.
It is not government’s role to stabilize the private marketplace; government’s role in the marketplace involves impartially enforcing contracts created in the marketplace. Economics is the study of, not the control of, scarce resources with have alternative uses. Economics does not equal economic policies of any government.
The old adage about practice makes perfect (performance) is wrong. Perfect practice makes perfect performance. Teaching defective economics or economic policies for 16 straight years leads to imperfect knowledge that consumers use as they try to make good decisions about their limited resources.