Political & Economic Debate
Automation has always resulted in new jobs and higher living standards. But many people have a difficult time trusting in what they cannot see and find the iron fist of government more comforting than the invisible hand of the free market.
Good politics and bad economics have been on display in British political conversations as the parties release their manifestos for the upcoming elections. Prime Minister Theresa May's suggestion that energy prices be capped and migration controls strengthened was outstripped in economic foolishness only by Labour's £48.6 billion tax increase and their proposal to nationalize the National Grid .
People buy and sell stuff all the time. Unfortunately, this leads many to the false conclusion that they understand economics. Engaging in commerce doesn't impart an understanding of economics any more than being sexually promiscuous imparts an understanding of genetics.
Profit is a funny word. It has come to mean exploitation. Why do we allow the Left to capture words like profit, or community, or compassion and redefine them into politically charged meanings far removed from what they really are? If we believe in a moral, popular capitalism, we need to reclaim key words for their true meaning.
The economist must engage in the unpopular task of protecting the public from itself. This is often an activity that the public strongly dislikes. Nobody likes being told there is no such thing as a free lunch. But it is incredibly important.
Just as the biological process leads to species adapting to their environments because the mutations that enhance survival will get passed on to future generations, so do economic processes lead to humans better "adapting to their social environment" by rearranging the physical world in ways that create more value.
Ronald Reagan wrote in his autobiography, An American Life, "[M]y major was economics. But I think my own experience with our tax laws in Hollywood probably taught me more about practical economic theory than I ever learned in the classroom or from an economist."
In the real world, prices often seem far above marginal cost. If you're steeped in the perfectly competitive model, where price always equals marginal cost, it's easy to feel "ripped off" whenever you make a purchase. The obvious rebuttal is to point to all the fixed costs of production, but this greatly understates what a fantastic deal we consumers get.
Ruchir Sharma is the latest economist to embrace the popular notion that we - and the rest of the world - are unable to grow as we once did. Supposedly the "global economy has changed in ways that reduce growth," and because of the changes, subdued economic activity will be the structural norm going forward.