Seeing is Believing

<img class=”alignleft size-full wp-image-3813″ src=”” alt=”” width=”259″ height=”194″ />Americans  are prepared to die for their fantasies. Our fantasies as they have been translated into military adventures have already killed many in foreign lands. I believe that many Americans will die. The reality we all have is the stress of uncertainty and uncertainty is all we have. No fantasy can change that fact.

Economics is a very simple subject. It is normal to come up with complex theories that tell us there are ways governments can stimulate economies productively. Charlatans become well paid for making people believe that economics can do things that cannot be done. The temptation to believe  smart people can make the universe less harsh than it is is overwhelming.

Free markets alone create wealth and optimize fairness. It is often said that government intervention is necessary to temper the harshness of free markets.  The fantasy is that government has a way to accomplish such a task.

A peculiar aspect of the free market system is that in the present moment benefits are invisible.  Adam Smith coined the phrase invisible hand. Society assumes nothing positive is going on.

On the other hand when unemployment increases and business fail, those things are right out front for everyone to see. It looks is if all opportunities are disappearing and nothing positive will emerge. Fantasy will dictate that government can fix it. People will fantasize that smart people in government will do something to keep the economy from collapsing. Smart people will bubble up with programs that are based on seemingly flawless logic. Fixing the economy is a terrific hustle. Much wealth and income has been accumulated presenting and implementing economic improvement plans. In the history of the world there has never once been a benefit from a government intervention in an economy.

The free market system is what occurs in nature when slaves are freed. In any other system, force is used in the market place. When Adam Smith was writing The Wealth of Nations, serfs in Europe were gaining freedom, both personal and economic. The difficulty in assigning a government the task of allowing free market discipline is that the population is unable to fathom that it will work.

So, many solutions are fantasized. None of them will work. Governments do all they can to prevent recessions. In time an even bigger recession occurs because government intervention always misallocates resources.

Citizens opt for government intervention because they can see economic problems as they unfold. The only real solution is to do nothing and wait as resources are being allocated more efficiently and new business ventures are bubbling up. Panic sets in because the solution, while working, is invisible.   The problems are in plain sight. People believe what they see but what they can’t see is actually much more important.

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