Socialism is a scam

 

Work on the premise that Venezuela was just a mistake, that most socialist leaders are merely trying to milk the economic system for whatever they can extract based on some kind of moral blackmail, but don’t actually want to get rid of the capitalist system which they perfectly well understand is the basis for all of their ill-gotten gains. Just work on that as the premise. The argument then becomes, we the people are oppressed and therefore whoever has more than we do owe us. The entire fault in the economic system reduces to, we want more goods and services than we already have. That is as far as any notion of justice is concerned.

Socialism amounts to precisely this: what we cannot get through our own contribution to the economy we should get through the political process. Everyone then makes up some reason why the economic system has short-changed them and why they ought to receive more in income than they have contributed to output.

Here you can see the scam in action in all its absurdity: College Students Demand Free Laundry Detergent and Fabric Softener Because… Racism.

A group of students at Sarah Lawrence College released a set of demands Monday, including free housing and food for students, to amend for alleged “injustices imposed on people of color.”

Members of the “Diaspora Coalition” presented the list of demands to President Cristle Collins Judd during a two-day sit-in at her office and accused the college of being an unsafe place for minority students and failing to properly commit to social justice….

The 9-page list of demands includes the following:

  • Free winter housing with a “communal kitchen” containing
    “dry goods from the food pantry”
  • Free laundry detergent and fabric softener for all students
    Special housing for students of color
  • Allow students to share meal swipes because “It is
    unacceptable that there are students with leftover swipes at
    the end of the semester when other students are going hungry
    because they run out of meal options.”
  • A mandatory first-year orientation session about
    “intellectual elitism”
  •  On-campus jobs prioritize the hiring of international
    students
  • Prevent students of color from being educated about history
    by “racist white professors”
  • Reject funding from the Charles Koch Foundation and review
    the tenure of “racist” professor Sam Abrams
  • All students have unlimited access to therapy sessions
  • Permanent funding for minority student unions that is not
    paid for by the student body….

It’s a scam. There is not an ounce of economic or moral justification in any of it. But they pretend there is, and others, specially others who do not pay any of this out of their own pockets, play along by agreeing to pay out at least some of what is sought.

What will kill an economy stone cold dead

Quite interesting discussion today on what’s wrong with socialism and why don’t we teach what’s wrong with socialism. The consensus at the end – which I might add I am not part of – was that we do teach what is wrong with socialism but not in the way that I think it should be taught. OK, maybe. But on this there was complete agreement – this was my last slide.

Each of these will kill an economy stone cold dead – from I, Mechanical Pencil:

  1. If economic decisions are made from the centre and not by entrepreneurs
  2. If finance and national savings are allocated by the government
  3. If prices are administered by the government
  4. If guiding an economy according to profitability is sharply restricted, if not actually eliminated
  5. If heavy-handed and inappropriate regulations are issued by governments
  6. If property rights are abolished or else strictly curtailed.

If there is consensus on this, then this should be taught to every student who goes through an economics course, and to everyone else as well.

Meanwhile the socialist trope travels farther and wider with not all that much getting in its way. Some recent examples.

There is a phenomenal amount of ignorance in what she says, but at the end, with her statement that it is the workers who create the wealth [to much applause] we are dealing with a quasi-Marxist conception if not actually full-on Marxist since the entrepreneur has no explicit function.

The problem in dealing with “socialism” is that it has a range of meanings, from a very light-on forms of the welfare state all the way to central planning and the complete nationalisation of the means of production. Whatever else it might mean, however, is that it is a desire to have something different from the present. Two items to help think about things. First this, which is from a comment from a post at Powerline.

And before I get to it, I will just note that he leaves out, and indeed seems not to know, anything about the Socialist Calculation Debate, which states categorically that an economy without a price mechanism determined within the market by entrepreneurs who respond to the world as they find it and prices as they are generated in the market, is doomed to fail. That of itself will ensure the economy cannot function.

Most commonly, “socialism” is being applied to a vision rather than an ideology or methodology, a vision where the great wealth created by an economy is distributed more widely so that the people with the least money get more benefit from the economy. In the wealthier countries of Europe and Asia, that vision is carried out with a welfare state and high level of command in an economy that is still based on private ownership and on free exchange. People in the UK or in Japan may still choose their occupations and their businesses are privately owned. There’s a large range of salaries among those who work for wages or salaries. Those who have somewhat larger incomes pay much higher taxes to subsidize welfare-state subsidies of those who make less money. You also have the panoply of labor laws that stifle economic development but do not kill it outright and you have a lot of petty laws, almost tyrannical laws, passed by the duly elected representatives of the very people who carp about high unemployment, high taxes, stagnant economic development, and the wickedness of the wealthy. But this system is not socialism as an economic system; it does less harm and it does it more slowly.

A near-command economy with the ownership and much of the profits of economic activity still in private hands is the fascist model. Since the owners connect closely with the political powers and since the owners still want profits, this brand of command economy will make efforts to keep up profits but those efforts will be misguided because command economies are inherently limited in their responsiveness. Beyond the inherent limits of attempting to run an economy by committee, every command economy has also wound up listening to the loudest and most influential voices but those voices rarely know or care about the broadest benefit for their societies….

Most of our soi-disant “socialists” are actually welfare-state nanny-bullies. Their policies and theories are not geared to collective ownership but to collective pillaging. In terms of discussion and dealing with the special brand of s-word that is socialism, it matters that that is not what is on the floor. We need to address the s-word of welfare-state nanny-bullyism because that is what is actually on the floor.

And then this: Young Americans are embracing socialism.

61% of Americans aged between 18 and 24 have a positive reaction to the word “socialism” — beating out “capitalism” at 58%. Overall, 39% of Americans are well-disposed toward socialism, but the gulf remains wide for men and those aged over 55.

It’s only a word. At the moment across the whole of society there are still 61% who react positively to the word “capitalism”. But that is if you are older and male.

Socialists do not care about you only themselves

Very few appreciate the cynicism of the leaders on the left who have zero interest in your welfare but have an enormous interest in their own. Comments from here.

On the left, the leaders seek power, the proles want security, and the intelligentsia wants to cement their superior social status. None of them care about your prosperity and freedom.

Those who have studied the life and writings of the leading socialist intellectuals — the people who really knew what they were about and were not beguiled by false promises — have always been quite aware that their goal was destruction. Destruction is not an unintended consequence: it is the objective of their philosophy. Does anybody think the guy who wrote the following verse really intended for a brotherhood of man to live as equals in universal prosperity?

“Till heart’s bewitched, till senses reel:
With Satan I have struck my deal.
He chalks the signs, beats time for me,
I play the death march fast and free.”

Or, could it be expressed more explicitly than this:

Worlds I would destroy for ever,
Since I can create no world

In case you’re wondering, those lines are from the poetry of none other than Karl Marx. More modern socialists of expressed similar sentiments. For example, Obama and Clinton’s hero, Saul Alinsky, literally dedicated his work to Lucifer. Sure, it’s a literary allusion … but it’s a literary allusion with significance: it is a dedication to a “the thief who comes not but for to steal and to kill and to destroy.”

Can it be any more obvious, at this point, that the purpose of implementing socialism is to blow up the whole capitalism-based free market republic? They long for the excuse to declare martial law and take it all over.

They are completely content to see everyone poorer and more miserable so long as we are all equally poor and miserable. And, worse, that includes bringing the USA standard of living down to something closer to the world average. The ruling elite will of course be excluded from the program — ya gotta keep up the strength of the ones doing all the thinking and planning for the rest of us.

Yes, socialists create and throw monkey wrenches into the gears of capitalist economies, to slow them down and to stop them. It’s what they do and they’re pretty good at it. The biggest one of all is what they call global warming.

Socialism is a philosophy based on envy. “If I can’t be one of the 1%, then no one will!” The sociopaths who invariably take over socialist countries use envy to steal everything from everyone, destroying the societies in the process.

Someone to take care of me

There is a phenomenal amount of ignorance in what she says, but at the end, with her statement that it is the workers who create the wealth [to much applause] we are dealing with the Marxist form of socialism since the entrepreneur has no explicit function.

The problem in dealing with “socialism” is that it has a range of meanings, from a very light-on forms of the welfare state all the way to central planning and the complete nationalisation of the means of production. Whatever else it might mean, however, is that it is a desire to have something different from the present. Two items to help think about things. First this, which is a comment from a post at Powerline.

And before I get to it, I will just note that he leaves out, and indeed seems not to know, anything about the Socialist Calculation Debate, which states categorically that an economy without a price mechanism determined within the market by entrepreneurs who respond to the world as they find it and prices as they are generated in the market, is doomed to fail. That of itself will ensure the economy cannot function.

One of our problems has a lot to do with terminology. Maybe several of our problems have a lot to do with terminology. When someone says, “There’s a mess on the floor in the kitchen,” the lucky soul who will deal with the mess needs to know more about the mess. Of perhaps substitute a certain s-word for the word mess, but typing “a certain s-word” a bunch of times will tire me out.

The word “socialism” is being applied to many kinds of messes but they are not all socialism, just as people only sometimes mean s-word when they refer to “that s-word.”

Most commonly, “socialism” is being applied to a vision rather than an ideology or methodology, a vision where the great wealth created by an economy is distributed more widely so that the people with the least money get more benefit from the economy. In the wealthier countries of Europe and Asia, that vision is carried out with a welfare state and high level of command in an economy that is still based on private ownership and on free exchange. People in the UK or in Japan may still choose their occupations and their businesses are privately owned. There’s a large range of salaries among those who work for wages or salaries. Those who have somewhat larger incomes pay much higher taxes to subsidize welfare-state subsidies of those who make less money. You also have the panoply of labor laws that stifle economic development but do not kill it outright and you have a lot of petty laws, almost tyrannical laws, passed by the duly elected representatives of the very people who carp about high unemployment, high taxes, stagnant economic development, and the wickedness of the wealthy. But this system is not socialism as an economic system; it does less harm and it does it more slowly.

A near-command economy with the ownership and much of the profits of economic activity still in private hands is the fascist model. Since the owners connect closely with the political powers and since the owners still want profits, this brand of command economy will make efforts to keep up profits but those efforts will be misguided because command economies are inherently limited in their responsiveness. Beyond the inherent limits of attempting to run an economy by committee, every command economy has also wound up listening to the loudest and most influential voices but those voices rarely know or care about the broadest benefit for their societies.

Fascist societies are usually welfare states to bribe the common people — people like me.

Socialism involves the ownership of the economic entities by their workers. Now, strange to say, this can actually work if the businesses remain private and the government mostly keeps its hands off. If the workers and retirees of GM and Ore-Ida Foods owned the enterprises and still had to compete effectively with Ford and Tyson, the workers would have lots of reason to increase their productivity, improve their products, lower their costs, and otherwise operate for the enterprise’s benefit. In theory, at least, an economy could thrive this way and the workers might indeed have their standards of living rise and become somewhat more equal across the skills that the enterprise needs. A socialist economy could be a free exchange economy with nearly all the blessings of such an economy and perhaps relieving some of the problems that come with all economies.

Problem with this model is, history shows no examples of societies that have organically evolved worker-owned enterprises that compete as private businesses. The US has gone a few steps down this path but only a few. We don’t know if the theoretical success of such a system would turn up in real life because there’s such a huge push to immediately distribute the goodies and so the geese that lay golden eggs get slaughtered and you find out there’s no actual gold in the geese.

Communism, the ultimate command economy with state ownership of all major production and distribution and “equal” sharing of the fruits of the economy, has failed even worse than other command economies. I can’t figure out the relationship between having to impose communism by force and its invariable failures, but I am sure the two factors are linked. Perhaps a circle has neither beginning nor end.

Most of our soi-disant “socialists” are actually welfare-state nanny-bullies. Their policies and theories are not geared to collective ownership but to collective pillaging. In terms of discussion and dealing with the special brand of s-word that is socialism, it matters that that is not what is on the floor. We need to address the s-word of welfare-state nanny-bullyism because that is what is actually on the floor.

And then this: Young Americans are embracing socialism.

61% of Americans aged between 18 and 24 have a positive reaction to the word “socialism” — beating out “capitalism” at 58%. Overall, 39% of Americans are well-disposed toward socialism, but the gulf remains wide for men and those aged over 55.

It’s only a word. At the moment across the whole of society there are still 61% who react positively to the word “capitalism”. But that is if you are older and male.

The Making of Modern Economics

From someone who gets Keynes and Say’s Law.

Greetings from Mark Skousen to my friends in the Mont Pelerin Society.

As you know, socialism has suddenly become all the rage with the rise of Senator Bernie Sanders and Congresswoman Alexandria Ocasio-Cortez (whom I call Castro-lite) here in the United States and in Europe.

Don’t think for a moment that the New Socialists are a flash in the pan.

The Green New Deal, Modern Monetary Policy, Medicare for All, and Free College are all being taken seriously by students, politicians, and media, unworkable and inflationary as they are.

Sanders is running for President in 2020 and would consider Ocasio-Cortez as his running mate, if she were eligible (she’s only 29 years old).

How do you fight a bad idea? With a better idea!  It’s time to start a campaign to promote the best of capitalism and free-market economics.

The Economist is convinced that pro-market forces “have all too often given up the battle of ideas” (Feb 22 issue of “The Rise of Millennial Socialism”)

Let’s hope not!

How to fight back?   I’ve started a campaign to promote my book,

“The Making of Modern Economics: The Lives and Ideas of the Great Thinkers.”  

Now published by Routledge in a new third edition, it’s been endorsed by Milton Friedman, Roger Garrison, Peter Boettke, Ken Schoolland and many other members of the society.

It tells the unique story of Adam Smith, the founder of free-market capitalism, and how his “system of natural liberty” comes under attack by the Marxists, Keynesians, and socialists, and is often left for dead, but then is resuscitated by the French laissez-faire school, and the Austrians and the Chicago school, and triumphs in the end.

It has five chapters that rip apart the arguments that the Socialists and the Keynesians make.

It has converted many Marxists to free-market capitalists, and one reviewer calls it “the most devastating critique of Keynesian economics ever written.”

Most importantly, my book introduces the reader to the great defenders of free-market capitalism, including Adam Smith, the French laissez-faire school, and the Austrian and Chicago schools (as represented by Mises, Hayek and Friedman).

Last November, I started the campaign by purchasing a full page ad in The Economist and received hundreds of orders from around the world. You can see the ad here: http://mskousen.com/2018/11/the-economist-publishes-new-ad-for-making-of-modern-economics/.

The Ayn Rand Institute recently ranked it the #2 most important book ever written about economics (just behind Henry Hazlitt’s “Economics in One Lesson”).

It won the Choice Book Award for Outstanding Academic Excellence.

It’s been translated into six languages — in Chinese (twice), Spanish (Union Editorial), Turkish, Mongolian, Vietnamese, and Arabic.

Students, fellow economists, and business leaders are fans. Professor Roger Garrison (Auburn U) says, “My students love it.  Skousen makes the history of economics come alive like no other textbook.”

“Skousen gets the story ‘right’ and does it in an entertaining fashion, without dogmatic rantings.” – Peter Boettke, George Mason University.

The late Milton Friedman wrote, “All histories of economics at BS –Before Skousen!  Lively and accurate, a sure bestseller.”

John Mackey, CEO, Whole Foods Markets, said, “I have read it three times. It’s fun to read on every page. I love this book and have recommended it to dozens of my friends.”

And the late William F. Buckley Jr. told me, “I champion your book to everyone.  I keep it by my bedside and refer to it often.  Every student should have a copy.”

The story behind this book is quite extraordinary. You can read it here: http://mskousen.com/2018/10/adam-smith-and-the-making-of-modern-economics/.

“The Making of Modern Economics” is a 500-page book available in hardback, paperback, Kindle, or audio.  The quality paperback retails $53.95 by Routledge and $43.74 on Amazon, but you can buy it for only $35 directly from Skousen Books, including postage. I will autograph each copy and mail it for free. (For orders outside the US, add $30 for airmail shipping.) To order, call Harold at Skousen Books, 1-866-254-2057. Or order online at www.skousenbooks.com.

I was interviewed on C-SPAN Book TV about “The Making of Modern Economics.” Watch the 20-minute interview here:  https://www.c-span.org/video/?307279-1/the-making-modern-economics.

We can win the battle of ideas. Let the campaign begin!

Yours for peace, prosperity, and liberty, AEIOU.

Sick and demented

In contrast, sharp contrast: Trump Calls Out House Dems for ‘Inconceivable’ Failure to Condemn Anti-Semitism.

More on all this here and here.

PLUS THIS:

Via Instapundit with the full details from here.

AND NOW THIS: From Rahm Emanuel of all people: I’ve Faced the Charge of Dual Loyalty – It was Anti-Semitic then, and it’s anti-Semitic Now.

No one is questioning the right of members of Congress and others to criticize Israeli policies. But Omar is crossing a line that should not be crossed in political discourse. Her remarks are not anti-Israel; they are anti-Semitic.

A modern course in economics will not tell you what’s wrong with socialism

“Socialism” is an elastic term, with a different meaning and connotation for everyone, which lets every believer in a socialist future off the hook since they can always say that’s not what I have in mind and it’s not what I mean. Moreover, I leave out the politics which is what everyone normally thinks about, since every socialist state – except the one that socialists imagine in their minds and discuss in public before they set one up – is about milk and honey for everyone, equality for all, and happiness to the fullest extent that human life can create. It is a fantasy world entirely removed from the reality of life.

Here I will define socialism as a system in which the economy is directed by the government through some kind of centrally-determined plan, rather than the economy being allowed to run on its own by itself through the decisions made by the individual owners of businesses. Nationalisation, massive levels of public sector spending, price controls and heavy-handed regulation of whatever is left in private hands are the mainstays of a socialist economy. If all it were was the normal operation of an entrepreneurial-driven market economy then there would be no need to set up anything new. Since socialists never specify beyond pie-in-the-sky what they intend to do – only the outcomes they promise to achieve – the best we can do is see what is found in the socialist literature of the past and present, as well as the practice of various socialist states, also both past and present.

I will add that macroeconomics as it is now taught, which sees only a positive role for large levels of public spending and thinks that an economy is perennially in danger of a failure of demand because of decisions to save rather than spend, are nine-tenths of the journey towards an acceptance not only of socialism, but of its necessity. The role of government in managing the economy and filling in the expenditure gaps with its only massive levels of expenditures is mainstream theory taught all over the world.

The basis for the presentation is my belief that a modern course in economics, based on standard economic texts in which the standard economic theories are presented, will leave a student without an adequate understanding of why a socialist economy cannot work, and in many cases with no such understanding at all.

This is based on my observation that very few – whether an economist or otherwise – can explain why socialism inevitably leads to poverty, although anyone willing to look can see this is true. There are innumerable political and philosophical reasons for fearing socialist ideas:

  • centralised political control
  • extraordinary power granted to government
  • loss of political freedom
  • diminished personal responsibility
  • diminished independence
  • encourages sloth

The presentation is based on my just-published, “I, Mechanical Pencil” which has been put out by the CIS and which you can find a copy of here.

My approach to the presentation is first to list the six absolutely essential elements of an economy, the absence of any one of which will cause the economy to cease working other than in the most rudimentary way. These six are:

(1) entrepreneurs who make decisions for themselves
(2) an independent financial system
(3) an operating price mechanism
(4) business profitability as the major determinant of what is produced and how it is produced
(5) sound government regulation, and
(6) a robust defence of property rights.

(1) Entrepreneurs

Every productive enterprise must be run by someone. There are many decisions to be made, all of which require a constant ability for someone to respond both to opportunities that present themselves and the problems which are both frequent and inevitable. In a market economy, productive enterprises are run by individual members of the community who do so because that is how they seek to earn their incomes. No entrepreneur is a government employee, nor are they chosen by governments to run these firms. Instead, entrepreneurs are the individuals who truly care about the welfare of the business, partly because every mistake takes money from their pockets, but also because the business is their creation in the same way that a work of art is the creation of an artist.

Entrepreneurs are not mere managers nor can they be replaced by managers. They are the individuals for whom the business is their own, and which they spend their lives trying to shape into as good a business as it can possibly be. It is not just a job. It is a vocation.

Yet no text on economics discusses the role of the entrepreneur. You can do ancillary courses in which the entrepreneur is discussed, and these are almost entirely courses that focus on innovation. The actual superintendence of a business is seen as of almost no relevance to the operation of a firm.

It is also the entrepreneur who determines what will be produced, and is entirely responsible for the commercial introduction of innovation onto the market.

(2) An independent financial system

Similarly, finance is not discussed as part of the education of an economist. There is money, banking, interest rates and the role of saving that do get a run through, but the determination of which firms are determined to be potentially the most viable by those who make lending decisions is at most a paragraph worth of discussion.

More crucial, the very issue at stake in the decisions that go behind finance is the allocation of a nation’s available saving among all the alternative uses that savings might be channelled towards. And here there are two massive blunders which almost totally obscure what it taking place.

Saving is discussed almost entirely (perhaps entirely) as a flow of money. And in a standard macro analysis, it is made up of the difference between current income and current consumption: S = Y – C.

Then, beyond this, the level of saving is taken to be the sum of money that is generated during the course either of the quarter or the current year, but whatever period is chosen, the present, or near present is all that counts.

Thus, the very concept of saving is totally lost. What is actually being determined by finance decisions is completely misstated. Saving is not a sum of money, saving is that stock of productive assets (eg machines and buildings) and available labour that can be used to build additions to the nation’s capital stock. What those who provide finance actually do is determine to whom to give sums of money that allow particular businesses to purchase in the various forms of capital and labour with which they can complete their own investment projects.

More destructive still is the imbedded Keynesian belief that recessions are caused by excess saving. The entire and madly destructive theory that explains recessions as a sign of that savings levels are higher than businesses wish to invest has led to decisions across the world for governments to engage in largely wasteful and unproductive spending to soak up those savings, as if sums of money sitting in bank accounts or in some other way left unspent is evidence that our savings are being left unused.

The reality is that virtually every form of saving (capital equipment and labour) are owned by someone who does everything they can to ensure that the capital and labour they own (the labour is, of course, their own labour) are being put to work. There are periods of transition when capital and labour are idle – factories close and people lose their jobs for all kinds of reasons – but unemployed workers along with whomever owns the capital will do everything they can to find alternative forms of work. We systematically ruin our economies by following Keynesian models and prescriptions.

(3) An Operating Price Mechanism

This is the one that counts since it is both the most obscure but also the most important. This was the issue at the heart of the “socialist calculation debate” that went on from the 1920s and through until the 1950s and then ceased. No one, other than in a few classes here or there, is ever taught anything at all about any of this.

More to the point, in a world in which there are infinitely more uses for most of the resources that are available, and also many ways that any particular output could be produced, there is an absolute need to ensure that some means to choose the least resource-intensive means to produce each good or service. Unless you understand why a business cannot decide which way to produce using the fewest resources if there is no price system in existence, you will never be able to undermine socialism. Here is a made-up example for the production of a number of units of X.

X = 2A + 3B + 4C + 9D
X = 3A + 4B + 3C + 7D
X = 7A + 5B + 2C + 4D

All of these might be ways to make the same number of units of X but unless you know in a realistic way how much A, B, C and D cost, you cannot determine which way to produce at the lowest cost. These are not technical questions but entirely economic.

What is the relative value of a tonne of steel in comparison with a tonne of copper? Is it cheaper to build a wall out of plaster or out of wood? Only in a market system, where the producers of every single input have to price what they sell to earn a positive return on their outlays, can there even be an estimate made of which array of inputs would provide the lowest cost to the economy in providing the same utility to the buyer.

As in the above example, you will still get X irrespective of which combination of inputs is chosen, but some of those resources are rare and have other more valuable alternative uses. Without a price mechanism based on the proper relative valuation of the output, that can only be determined in a market setting by entrepreneurs, a central planner cannot even begin to decide how to go about producing anything.

And it has ever been thus in every attempt to introduce socialism. Every socialist economy immediately loses its bearings because it has no means to decide which alternative would use up a smaller proportion of the resource base of the economy, and if it cannot do that, it will choose means of production that will waste prodigious amounts of resources on each particular item so that fewer items in total can be produced.

There was a long debate over whether central planners could manufacture a reasonable facsimile of relative prices that happen naturally through entrepreneurial pricing on the market. It was at one time understood even among the defenders of socialism that an answer to this question was crucial if a socialist system was to function. And the fact is, that this issue was never properly resolved, as was evident by the collapse of the Soviet Union in the late 1980s.

The most astonishing example was the different standards of living in East and West Germany. The differences were immense since the East Germans could not even remotely maintain the same living standards, and this was even though they tried to determine costs by using the relative prices generated in West Germany and apply these to their own production techniques. But as close as they were both geographically and culturally, the relative price structure generated automatically in the West were near useless to the central planners in the East since they did not in any way reflect their own production costs.

(4) Business Profitability

For reasons that I will not explain here, but every economist is taught, the ideal model of the operation of an economy is described as PERFECT Competition, and is contrasted with all other forms which are described as Imperfect Competition. For some reason, the ideal form of market structure is one in which, as it says below, “no one earns a profit”.

Perfect Competition – No One Earns a Profit

In perfect competition, the market is the sum of all of the individual firms. The market is modelled by the standard market diagram (demand and supply) and the firm is modelled by the cost model (standard average and marginal cost curves). The firm as a price taker simply ‘takes’ and charges the market price (P* in Figure 1 below). This price represents their average and marginal revenue curve. Onto this we superimpose the marginal and average cost curves and this gives us the equilibrium of the firm.

Source

The conception to reach this conclusion is so entirely static that it is absurd to think of this as in any way representative of the operation of a market economy. The very existence of profit shows, so far as economics is concerned, that the economy is not running at peak efficiency. There are also questions of an improper distribution of income since in a truly competitive economy, and in the long run, a larger return than the absolute minimum somehow implies that the market is not functioning at its optimal level. All other market structures, which in reality represents about 98% of the economy, are inefficient because firms are able to adjust their level of supply to earn a profit above the efficient minimum. But the existence of profit, as defined within an economics text, is a negative.

(5) Sound Government Regulation

There are schools of economic thought for which the very notion that government regulations have any role to play is anathema. There is no doubt that there can be over-regulation, and we experience just that everywhere today. The principle seems to be that if someone can think of some negative potential in some action, that it will either be examined to death or forbidden. But the opposite principle is just as bad, that business should just be allowed to get on with things without any scrutiny or direction from government.

The point here is not just that regulation is essential, but that regulation must be limited to just those forms of control that will actually pass some kind of cost-benefit test. Here the issue for modern economics is not that there should be regulation. That is much of what an economics course now is – a discussion of market failure and the need to remedy the errors of the market. So in this instance, the point here is to recognise that some regulation is essential.

This is from Mises’s Human Action. And while it is clear that Mises is reluctant to state that there is such a role for governments because of the principle of give-them-an-inch-and-they-will-take-a-mile, nevertheless, he does accept that government does indeed have such a role.

There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule. (Mises [1949] 1963: 748)

Regulatory overkill has been a disaster for the functioning of our economies. I truly never understand how the entrepreneurial types I know put up with it. You would think that those who set the rules are doing so with the intent of killing businesses off.

(6) Property Rights

Socialist governments are notoriously opposed to the private ownership of the means of production. “Expropriate the expropriators” is the ancient expression. Nationalisation of the commanding heights of the economy and whatever.

Whether this is driven by envy or by some unstated economic rationale, the aim to achieve something described as “equality” is the mantra. The result is that those who produce are taxed to provide incomes to those who produce less or produce nothing at all. And in the socialist commonwealth, the levelling is complete, with the masses living in poverty and those at the top living upon the meagre levels of wealth the economy might be capable of producing.

If property rights are included in a standard text, it has escaped me. There is nothing in how modern economics is taught, with it abstract and often mathematical discussion of the operation of the various forces to produce the strangest economic notion of all – equilibrium – that anywhere mentions that only if the producers of capital believe they will maintain the ownership of what they have crafted, will that capital come into existence in the first place.