Perpetual Motion Economists

Most of the present day economists are the modern equivalent of the high spirited inventors of prior times, bent on designing a perpetual motion machine. Perpetual motion enthusiasts were convinced they could get around the laws of physics to produce motion without any external source of energy, even though those laws had long been identified and deny any possibility of success. In the same way, most modern economists tinker around with things economic with the belief that he or she knows better and can get around the immutable laws of economics, which have also been established long ago.

They tinker with taxes, government payments, regulations, price controls, market manipulations, etc, even though they fly in the face of the fundamental laws of economics and have been proven wrong in precisely every instance. You cannot artificially set maximum prices below the market price without causing shortages. You cannot artificially set minimum prices above the market without causing surplus. You cannot regulate supply, demand or anything else in the market without paying the price of a grossly distorted market and misery for at least some people, not in even one instance.

In the free market, both parties gain from a transaction. If it was not so, the transaction would not take place.

That is the very nature of a truly free market. Every member is free to enter or not enter into a transaction, whether it is buying a house, a loaf of bread or a tank of gas. The very fact that the transaction is consummated is absolute proof the buyer valued the good or service more than the money and the seller valued the money more than the good or service. The buyer or seller might not be happy that the price was not lower or higher, depending on perspective, but it was obviously the best use of resources, given existing conditions and knowledge.

When government interferes, with taxes, incentives, subsidies, stipends, payments, regulations, services or any other intervention, it picks the winner, the person who will benefit from it’s beneficence. But the only way to pick the winner is by also picking the loser, directly or indirectly. Government is a less than zero sum game, a negative sum game. Something, usually a lot, gets lost in the translation in every government action.

The big difference between the perpetual motion “engineer” of yesteryear and the social “engineer” of today is that the former was playing with toys, things that didn’t have much effect on others. The latter is very dangerous because his or her irresponsible and ill fated experiments affect millions, even billions of people.

The laws of economics are known and are just as immutable as the laws of physics. You can choose to ignore them, or hide them in a mountain of numbers and reports and public relations fluff, but you cannot choose the consequences of ignoring them, any more than you can ignore gravity when you drive off a cliff. History is full of lessons about political leaders who chose to ignore the simple, fundamental laws of economics. The reason that history repeats itself is because people in power, and their economic advisors, like to tinker, even though the punishment is predictable and inevitable. It often becomes obvious that they do know the consequences all too well, but they also know that they will be on the winning side and not be the ones to bear the punishment.

Guess who is always on the losing side.

2 comments to Perpetual Motion Economists

  • Excellent post, Dan! I couldn’t have said it better myself. It reminds me of a speech that economist Gary Becker made a few years ago which I excerpted in my blog and which I plan to write a commentary on, in the near future. Unfortunately-in the real world, facts, evidence, and truth (FET) are often supplanted by fear, uncertainty, and doubt (FUD).

  • Great read, and to the point.

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