The Politically Incorrect Guide to Capitalism
When the government interferes with prices, it cripples the ability of free people to make intelligent economic decisions.
Corporate greed is not absent in the marketplace, but business can only charge what the market is willing to pay and generally must reflect the costs and supply/demand circumstances associated with their product. And if you believe their prices aren’t fair, you can choose to start a competing company and charge whatever price you believe is fair.
Rent control discourages renovations and can lead to shortages as the risk or expenses of renting are no longer practical/economical for owners/developers. And because housing isn’t granted to the highest bidder, rent control breeds slumlords who establish arbitrary standards for who they rent to, which the low cost allows for because of the artificially high demand due to the controlled prices.
While wage discrepancies can seem absurd on their face, they are the result of marginal utility. A teacher may be more valuable than a professional baseball player, but replacing that teacher is far easier than finding someone with the abilities of a professional athlete. Additionally, that player helps bring in millions of dollars through tickets and viewership and has a right to the fruits of his labor—otherwise that money disproportionately flows to the owners or other people in the industry.
Many credit the reform of child labor laws to unions or governments, but it’s actually a product of the free market. When a nation becomes wealthy enough, they choose not to send their children to work to earn for the family as they don’t need they extra money. Conversely, if they do need the money, child labor laws will force children into illegal professions to earn the money they and their families need.
If a profession was really being underpaid relative to the value they generate, a new employer could enter the market and pay the workers slightly more to steal their labor and still turn a profit. This would take place until the wages were at or around their fair value leaving no need for a minimum wage.
Discrimination in markets is perfectly reasonable. Employers discriminate based on talent and profitability all the time for the betterment of the market (ex: black-dominated basketball, female leads in movies, smarter and more productive workers). Discriminating based on more arbitrary grounds like race or gender will only limit your addressable market or pool of qualified employees, which either hurts you and your business or the customer selecting for discrimination that gives them a lesser good or service.
Affirmative action can be somewhat counterproductive insofar as it forces people into positions for which they can be unqualified simply because of their identity. It’s tries to help and instead sets them up for failure.
Slaves will perform the bare minimum not to be punished, but free labor will work hard to earn more. If you want human-like performance, you have to treat your workers like humans. If you treat them like animals, you will get the performance of animals but still absorb the costs of feeding and supporting humans.
If recycling an item costs more than the value gained from recycling it, the market won’t make an effort to recycle it. So when governments encourage recycling through arbitrary rewards like 5 cents per can, they can be causing more harm than good by costing the economy more energy and money than any of that recycling is worth.
Bureaucratic zoning can dramatically diminish the role of community policing or connectedness by separating businesses from residential housing, which was historically how towns were structured.
By enforcing tariffs on a country’s imports, you limit the amount of goods people buy from that country, but you also limit the amount of goods that country can buy from you because that country now has less of your currency for foreign exchange.
Trade deficits have to balance. If the US buys $1T of goods from Japan and they only buy $850B from the US, that difference has to go somewhere. Usually, that money returns in the form of investments and asset purchases, but it can also sit in US dollars as FX reserves for future trade.
Interest rates are essentially a measure of patience for payment and borrowing. In the construction of a large project like a factory that takes years to pay back its costs, early-stage workers will want payment right after rather than years later when the factory finally starts to make money. This is only possible through capital investment and the desire to earn interest by investors.
Middle men provide a valuable service in the economy. They absorb some of the burdens and take care of the logistics associated with selecting, transporting, business/loan defaults, etc., rather than forcing suppliers to organize more than they care to or can. They charge a small markup, but they afford consumers certain luxuries for that markup.
Speculation actually serves an important role and, contrary to common belief, is not devoid of utility. Speculators help balance out prices by attempting to buy low and sell high, which contributes to the discovery of fair market prices. Even futures speculators who buy contracts just to make money will encourage holders of commodities to stockpile more as a hedge to spot prices rising, which encourages production.
Key takeaways:
- Admit that government solutions are a problem.
- Have faith that humans can interact peacefully and economic blessings are available to all.
- Surrender to the fact that certain social ills cannot be irradiated by force or lil political will.
- Do I want to advocate self sufficiency and voluntary means or look to politicians every time I don’t like something.
- Survey the past record of governments when it comes to economic planning or other economic improvements.
- Learn to look for the hidden cost of government intervention rather than the superficial benefits.
- Understand the role of market prices and why tampering with them interferes with the job they have to perform.
- Study history. Examine whether governments that violated private property rights stayed out of their citizens’ other affairs.
- Before condemning a market outcome is unjust, first understand why it occurs.
- Study other spontaneous social institutions such as language and science where nobody is in charge and yet the outcome is quite orderly.
- When politicians propose a new program, remember how much they said it would cost at that outset and compare that number to the actual amount spent.
- Go through the news and discover how government meddling causes or exacerbates the conflict in virtually every story.