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Wednesday, April 13, 2005

Econ 101- Just Say No to Government

The Ludwig Von Mises website has an article "Politics causes Unemployment" by Professor Hans F. Sennolz. Sennolz comments on how various regulations create greater unemployment and then, when those regulations make things much worse, public opinion turns against the free market further to lead to greater regulation. And on and on.

Here is the basis of the argument:

"Whenever government forcibly raises employment costs it causes marginal labor, that is, labor that barely covers its costs, to become submarginal. It does not matter whether government orders wage rates to rise or benefits to be improved, the workday to be shortened, overtime pay to be raised, funds to be set aside for sickness and old age, or any other benefit to be granted. A small boost renders few workers submarginal, a large boost affects many. In matters of employment they now are “unproductive” and cannot be used economically.

It is obvious to all but politicians that any worker, male or female, old or young, Yank or Chinaman, whose service is worth only $10 an hour but must be paid $20 or more cannot be employed profitably. He would inflict clear losses on anyone who would hire him, which condemns him to a life of idleness, uselessness, and emptiness. Unaware of the very cause of his affliction, he is likely to take umbrage at society that apparently sentenced him to lifelong unemployment."

It took this ex-liberal a while to understand this. More accurate, it took this ex-liberal 44 years to begin reading economic textbooks and essays to finally move from emotional reactions as described above to an intellectual understanding of the effect of governmental intrusion into the economy. I was a baby Boomer version of my Depression generation elders who think FDR's economic policies ended the Depression (a myth I always bought). I now know his measures merely continued and extended the stupid Hoover policies to the point where things got much worse.

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