Liberty Maven

Following up on my previous post discussing the The Naiveté of Obama Supporters is another fantastic article by Sheldon Richman who wrote a commentary for the Foundation for Economic Freedom.  Richman comments on the fact that economic law trumps grandiose promises politicians make.  In the late 18th century, the great Ludwig von Mises taught us economic reality in the political arena:

When men realized that the phenomena of the market conform to laws, they began to develop catallactics and the theory of exchange, which constitutes the heart of economics. After the theory of the division of labor was elaborated, Ricardo’s law of association enabled men to grasp its nature and significance, and thereby the nature and significance of the formation of society. The development of economics and rationalistic sociology from Cantillon and Hume to Bentham and Ricardo did more to transform human thinking than any other scientific theory before or since. Up to that time it had been believed that no bounds other than those drawn by the laws of nature circumscribed the path of acting man. It was not known that there is still something more that sets a limit to political power beyond which it cannot go. Now it was learned that in the social realm too there is something operative which power and force are unable to alter and to which they must adjust themselves if they hope to achieve success, in precisely the same way as they must take into account the laws of nature. This realization had enormous significance for men’s action. It led to the program and policies of liberalism and thus unleashed human powers that, under capitalism, have transformed the world.

But today’s politicians ignore this reality and, either through hubris or deceit, make promises they simply cannot keep.  Richman writes:

Today’s political leaders, regardless of party and including, alas, Barack Obama, operate with this pre-modern mentality. We saw it throughout the presidential campaign, and heard its words when Obama said, “There is nothing we can’t do, nothing we can’t accomplish if we are unified.”

This is opposite of the classical-liberal insight, which can be summed up with this bumper-sticker slogan: Economics. It’s not just a good idea. It’s the law.

Because there are economic laws, there are limits to what “we” can do and how we can do it. (By we, of course, Obama doesn’t mean the spontaneous social order; he means the state and deliberate planning.) We cannot raise wages or create jobs or eliminate poverty or make medical care cheap and widely available — or do any of the other things politicians promise — by decree. But we can move toward those goals by freeing the market, the undesigned yet orderly process that distills the knowledge and wisdom of the people and rewards entrepreneurs for solving problems.

Government cannot do those things directly. If it tries, it will fail and make us worse off. The key to understanding this lies in the nature of human action. We live in a world of scarcity, and the list of scarce resources includes time and knowledge. At any moment demand exceeds supply. Under these conditions, we adapt means to achieve chosen ends. We face opportunity costs and make tradeoffs according to our subjective preferences. The perception of costs prevents us from achieving lesser values at the expense of greater values. Respect for other people and their property, backed by law, prevents us from shifting costs to them without their consent. The result is the market — that emergent order which serves the general welfare and encourages personal responsibility as each person pursues his or her private interests.

You’ll want to read the whole article.