Three Widely Believed Economic Fallacies

Steve Horowitz:

The Fallacy of the Zero-Sum Game

The first of these fallacies is the belief that market activities, especially exchange, are zero-sum games. Zero-sum games are those in which the total gained from playing the game is zero. So, for example, if each of five people playing poker buys into the game for $100, there is only $500 to be won.

. . .

We see this misperception of markets in a variety of forms. At the most general level, the belief that the rich get rich by impoverishing others is a species of zero-sum thinking.

 

 

The Fallacy That Order Requires Design

The second fallacy is the belief that economies require someone or some group to design and/or control them. Often this belief is linked to an argument from complexity: only a simple economy could be left to its own devices. Complex, advanced economies like those across most of the globe require human monitoring and regulation to function properly.

. . .

The flaw at the heart of this fallacy is that it ignores the idea of spontaneous or undesigned order.

 

The Fallacy that Consumption is the Key to Growth

The final fallacy is the belief that consumption is the source of economic growth. This belief is widely held by everyone from the citizenry at large up through economic journalists and politicians. We hear it every time the economy enters a recession and begins to recover. Pundits declare that consumers need to start buying things to generate a recovery, and reports about the latest data on consumer spending make the headlines.

. . .

In fact, consumption expenditures vary the least as economies go through booms and busts. The component with the greatest variation is private sector investment. If anything is needed during a recovery, it is more investment by the private sector, not more consumption.

. . .

The heart of the fallacy, however, is that consumption consumes things! When we consume goods and services, we destroy their value by using them up. Consuming food does not create anything valuable, it eliminates something valuable.

Excellent work. Read it.

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Amazon Executives Face NYC Protesters and Legislators

“We have a crumbling subway system, record homelessness, public housing that is in crisis, overcrowded schools, sick people without health insurance and an escalating affordable crisis,” said City Council Speaker Corey Johnson, a Democrat.

All those local issues, in one of the highest taxing and spending states in the U.S. Why is that so? And a proud progressive city and state to boot:

State Assemblyman Ron Kim, a Queens Democrat, told protesters rallying on the steps of City Hall before the hearing, ” Any politician in our progressive city and our state who’s willing to had $3 billion to Amazon — that should be a career ender right there.”

It would be funny if it weren’t so sad.

Whole thing here.

Can the Democrats Really Win 2020 with a New Green Deal?

Rep.-elect Alexandria Ocasio-Cortez (D–N.Y.) is at it again:

“This is going to be the New Deal, the Great Society, the moon shot, the civil rights movement of our generation,” . . . “We can use the transition to 100 percent renewable energy as the vehicle to establish economic, racial and social justice in America.”

Where does she get this nonsense from? Maybe she’s channeling the vision of Data for Progress. Ronald Bailey:

By their lights, the feds should aim for 100 percent renewable electricity by 2035 by shuttering all natural gas and coal-fired generation plants. All fossil fuel emissions should be ended by 2050. All new passenger automobiles for sale in 2030 should be zero emissions vehicles; all rail, vehicles, and aviation should be totally fossil-fuel free by 2050. Other parts of the Green New Deal include reforesting 40 million acres of public and private land by 2035, greatly expanding mass transit systems, upgrading local water supply and management infrastructure, expanding federal regulation of the waters of the U.S., and requiring that all materials be recyclable by 2040.

The financial cost is only one part of this stupidity. This will not be a peaceful transition; more like the equivalent of an-all out shooting war in its destruction. Imagine all the destruction, destitute, hollowing-out of towns, cities, suburbs, and entire swaths of the U.S. All the shuttered power plants, and discarded trains, subways, automobiles, jets, bridges. Imagine, millions of government bureaucrats invading your neighborhood, ordering the bulldozing of everything in sight. Think you’ll be safe in your home? Fagetaboutit. Midnight raids on your home if you resist. “This must be done!” Quartering of workers and soldiers in your house. Attempts to violate your rights will be commonplace, all to impose this “vision”, but really a nightmare.

All to finally, ultimately, and for good, “achieve economic, racial and social justice in America”. How quaint, how. . . just.

Whole thing here.

How Self Interest Builds Prosperity and Community

She’s happy and self-interested. The customer says “Thank you”, she, the producer, says “Thank you” and both are happy they got what they wanted.

Don Boudreaux:

Markets guided by prices daily lead each of us to share happily and abundantly with each other despite the reality that we are, to each other, mostly strangers. Familiarity, affection, and brotherly love are virtuous feelings but these feelings do not contribute as reliably to our material well being as does market exchange.

Here is a parable to make the point.

Read the whole thing.

Are You Ready for the ‘Inevitable’ Clampdown on Tech and the Media?

Figure Nick Gillespie skeptical:

Factor in the housing bust from a decade ago, the Great Recession, mall closings, the opioid epidemic, and whatever else you want to, and any semi-serious analysis is going to conclude that over the last few decades, “The living standards of Americans have vastly improved during the past 50 years, with the quality of available consumer products steadily rising even as their prices have steeply fallen.”

Me: there’ll be more corruption, greater market concentration, fewer choices, higher costs, lower living standards with more regulatory control. Check this:

When actually talking to Congress, Zuck (Facebook’s Mark Zuckerberg) even volunteered to help write the regulations, while noting that the more Facebook and social media are regulated, the less likely it is that a rival will emerge.

How altruistic, he’ll help write the regulations — for the benefit of Facebook and every other company whose representatives can influence him. That’s the way government regulation works. They’re not going to do it the way they say or what you think.

China Is Inching in the Right Direction

John Micklethwait: 

It is appropriate that Donald Trump and Xi Jinping are flying to Buenos Aires for their showdown summit at the close of a month that began with the centennial of the end of the First World War. America’s economic tussles with China are all too reminiscent of the rivalry at the beginning of the last century between Britain, the superpower, and the rising power, Germany.

Learn from history to avoid repeating the same mistakes. Peace and prosperity is a wonderful thing and there’s no reason the leaders of China and the U.S. cannot forge a mutually beneficial relationship.