Economics Without Illusions by Joseph Heath

Author:Joseph Heath [Heath, Joseph]
Language: eng
Format: epub
Tags: Divulgación, Ciencias sociales
Publisher: ePubLibre
Published: 2008-12-31T23:00:00+00:00

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Even when we can all agree about what the right outcome is, we often find it simply too heart-wrenching or difficult to carry out the actions necessary to bring that outcome about. No one seriously denies that the appropriate level of supply of a particular good or service is determined by the level of demand, or that prices should reflect relative scarcity. If there’s too much coffee relative to the amount that people want to drink, then prices must decline and production must be curtailed. And if there’s not enough gasoline relative to what people want to consume, then prices must rise and consumption must be curtailed. There simply is no other way to organize an economic system, whether it be capitalist or socialist.

As a result, there is a terrible irony in Jack Layton’s pronouncement on the subject of gasoline prices. As Lange observed, the best feature of capitalism is that competition forces private firms to act exactly as they would if they were governed directly by the decisions of socialist planners. Historically, however, the way that capitalism simulates socialist planning has been far more successful than any actual socialist system. The primary reason is that “socialist planners” cannot be trusted to make the hard decisions that socialist planners are supposed to make. In part, this is because a true socialist organization of the economy leaves the price system far more open to political interference than the market does. Generally speaking, one of the major reasons for wanting to keep the state out of the economy as much as possible is that politicians can’t resist dabbling around in it, in ways that are extremely detrimental in the aggregate or in the long term. This is why, even in the case of government monopolies, such as the central bank, a strict separation must be imposed between politicians and managers.

In other words, the fact that politicians insist upon behaving the way that Layton was behaving in calling for lower gasoline prices is one of the primary arguments for keeping the state out of the economy. Layton was unknowingly exhibiting the behavioral tendency that has served as the primary impediment to the development of a feasible socialist organization of the economy. To put the same point more polemically: It’s because of people like him that socialism doesn’t work.

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