Chodorov on Economics vs. Politics

A friend just passed to me an excerpt from the book "The Rise & Fall of Society" by Frank Chodorov (1887-1966), who wrote it in 1959. The part of the excerpt that leapt out at me is as follows:

And so it has come to pass that those who write about economics begin with the assumption that it is a branch of political science. Our current textbooks, almost without exception, approach the subject from a legal standpoint: how do men make a living under the prevailing laws? It follows, and some of the books admit it, that if the laws change, economics must follow suit. It is for that reason that our college curricula are loaded down with a number of courses in economics, each paying homage to the laws governing different human activities; thus we have the economics of merchandising, the economics of real-estate operations, the economics of banking, agricultural economics, and so on.

That there is a science of economics which covers basic principles that operate in all our occupations, and have nothing to do with legislation, is hardly considered. From this point of view it would be appropriate, if the law sanctioned the practice, for the curricula to include a course on the economics of slavery.

Economics is not politics. One is a science, concerned with the immutable and constant laws of nature that determine the production and distribution of wealth; the other is the art of ruling. One is amoral, the other is moral. Economic laws are self-operating and carry their own sanctions, as do all natural laws, while politics deals with man-made and man-manipulated conventions. As a science, economics seeks understanding of invariable principles; politics is ephemeral, its subject matter being the day-to-day relations of associated men. Economics, like chemistry, has nothing
to do with politics.

The intrusion of politics into the field of economics is simply an evidence of human ignorance or arrogance, and is as fatuous as an attempt to control the rise and fall of tides. Since the beginning of political institutions, there have been attempts to fix wages, control prices, and create capital, all resulting in failure. Such undertakings must fail because the only competence of politics is in compelling men to do what they do not want to do or to refrain from doing what they are inclined to do, [my emphasis] and the laws of economics do not come within that scope. They are impervious to coercion. Wages and prices and capital accumulations have laws of their own, laws which are beyond the purview of the policeman

Chodorv's thesis echoes Ayn Rand in many respects and certainly supports my own view that most of the economic problems we are suffering from today are the direct result of political interfence in free markets.

Read it all.

(thanks Frank!)

Ed Driscoll Warns Us of Our Impending "Rendezvous with Scarcity"

(via Instapundit)

The Wealth of Nations

P.J. O'Rourke, author of On The Wealth of Nations: Books That Changed the World, has an article in the Financial Times today, quoting extensively from The Wealth of Nations, written by Adam Smith 232 years ago. It seems things haven't changed much in all that time.

The idea that The Wealth of Nations puts forth for creating prosperity is more complex. It involves all the baffling intricacies of human liberty. Smith proposed that everyone be free – free of bondage and of political, economic and regulatory oppression (Smith’s principle of “self-interest”), free in choice of employment (Smith’s principle of “division of labour”), and free to own and exchange the products of that labour (Smith’s principle of “free trade”). “Little else is requisite to carry a state to the highest degree of opulence,” Smith told a learned society in Edinburgh (with what degree of sarcasm we can imagine), “but peace, easy taxes and a tolerable administration of justice.”

How then would Adam Smith fix the present mess? Sorry, but it is fixed already. The answer to a decline in the value of speculative assets is to pay less for them. Job done.

We could pump the banks full of our national treasure. But Smith said: “To attempt to increase the wealth of any country, either by introducing or by detaining in it an unnecessary quantity of gold and silver, is as absurd as it would be to attempt to increase the good cheer of private families, by obliging them to keep an unnecessary number of kitchen utensils.” [440]

We could send in the experts to manage our bail-out. But Smith said: “I have never known much good done by those who affect to trade for the public good.” [456]

And we could nationalise our economies. But Smith said: “The state cannot be very great of which the sovereign has leisure to carry on the trade of a wine merchant or apothecary”. [818] Or chairman of General Motors.

What is it that the French say? The more things change, the more they stay the same?

Read the whole thing.

Why Do We Have a Budget Deficit? Look to Congress, Not the President

When it comes to budget deficits, the sitting President usually seems to get the blame for them. In fact, the President can't spend a dime of taxpayer funds that the Congress doesn't appropriate. It's true that President Bush left office with a budget deficit but the deficit President Obama has inherited is mostly the creation of a Democrat controlled Congress. At the end of fiscal 2006, when Republican control of congress ended, the budget deficit was $248 billion. That's bad enough and the Republicans lost control in large part because they forgot why they were sent there in 1994 and acted like Democrats. They spent every thin dime of tax revenue that came into the Treasury and then some. And it certainly didn't help that it took until 2006 for President Bush to find his veto stamp. Perhaps if he'd reined in the Congress, the Republicans might have held onto it.

I expressed hope after the 2006 elections that 1.) the Republicans would learn their lesson and remember that people vote for them because they profess to be in favor of small government and fiscal discipline and 2.) that the Democrats would act responsibly, now that they'd been handed the car keys. No such luck. The deficit for the end of fiscal year 2008 ballooned to $407 billion and that was before the ill-conceived and hastily passed $700 billion TARP. Now President Obama is demanding that the Congress pass an $800 billion to $900 billion "stimulus" bill that will deepen the deficit even further and leave the bill for future generations to foot. Remeber who controls the purse-strings. It's the Congress. The hole may have started under a Republican Congress, but it's the Democrats that have kept on digging. The first rule of holes states that when you find yourself in one, you stop digging.

How do we stop this hole from getting deeper? We have to stop spending more than we bring in. No matter where you set marginal tax rates, receipts to the treasury will not exceed about 19.5% of GDP. Congress is currently spending about 21.5% of GDP. Spending has to be brought into line with GDP and if we want to really increase tax revenues (not rates, revenues) we need to grow GDP and the quickest way to do that is to reduce tax rates. Leave money in the productive economy, i.e., the private sector and we will start to come back. Unfortunately the Democrats are more concerned with punishing the "evil rich" and redistributing wealth than they are with actually solving the problem. They can do a lot of damage over the next two years and the Republicans need to point this out loudly, often and stick together to resist the systematic looting of the private economy by the statist, power hungry monster that is the Democrat Congress.

Atlas Shrugged - Maybe More Prophecy Than Fiction

Stephen Moore penned an op-ed in the Wall Street Journal yesterday, pointing out some eerie similarities between the events in Ayn Rand's classic Atlas Shrugged and our current economic/political situation. It's a long (1,000+ pages) book, in rather small type and can be heavy going at times, but it's worth reading. If you don't have the patience for that, at least go read the article. A sample:

"For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn, generate more havoc and poverty, which inspires the politicians to create more programs . . . and the downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight of taxes and other burdens imposed in the name of fairness, equality and do-goodism."

and

"The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto companies -- while standing next in line for their share of the booty are real-estate developers, the steel industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as "Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate "windfalls." "