28 February 2014

Economic Laws Trump Political Prestidigitation

‘It is the highest impertinence and presumption ... in kings and ministers, to pretend to watch over the œconomy of private people,’ observed Adam Smith. ‘If their own extravagance does not ruin the state, that of their subjects never will (Wealth of Nations, II.iii.36).’

This theme is explored in two essays posted this month. The first, ‘No Crystal Ball Needed to Forecast Fundamentals of Sound Economics’, takes a look at what constitutes ‘wealth producers’ and ‘wealth destroyers’, and why government — when it goes beyond providing the basic framework of law and order, and acting as a service provider of last resort — is so often a member of the latter group and not the former.

The second essay, ‘Raising the minimum wage while debasing the currency: an illogical economic policy?’ (published courtesy of the Institute of Economic Affairs), argues that instituting minimum wage laws while engaging in quantitative easing of the money supply is a hopeless venture; each activity considered alone is less than innocuous, but pursing both at the same time is an exercise in futility as any doubtful benefits are cancelled out and nullified.

Smith recognised that ‘All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord (IV.ix.51).’ To-day, encouraged by social democrats and their Progressive ideology, governments are addicted to these systems, whether through the aforementioned minimum wage laws and currency debasement or other forms of welfare economics. But, in the end, economic laws trump political prestidigitation.
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#DMI_Reads Update — Two volumes are in the reading queue this month: The Case for Capitalism (E.P. Dutton, 1920) by Hartley Withers and Lectures on the French Revolution (Liberty Fund, 2000) by Lord Acton.

Do you know of a little-known and under-appreciated volume on the French Revolution that you’d like to recommend? Write and tell me about it. And do people still read Thomas Carlyle on the subject? I’ve looked at the first few pages of his massive tome and been daunted, but am game to have another look if anyone is willing to make an argument in its favour.