When we consider a certain government policy, there are two paths one could take in analysis: the philosophical path and the consequentialist path. Now this simply means that when we hear of yet another potential law or regulation, or even reflect on old/current ones we naturally decide whether or not to support or oppose anything (perhaps not even laws) firstly by determining if it conforms to our moral/ethical/political philosophy. Let’s examine the philosophy of libertarianism: no person, group, or government has any right or authority to initiate positive or negative force (refer to article named “What Is Force?”) against any individual. Libertarianism also strongly upholds property rights, within the subject of property rights the principle of self ownership. So now let’s use an example of a well known policy; the minimum-wage law. Does imposing a price floor of labor and legally forcing employers to not hire any current or potential employee at a nominal wage below “X” amount, conform to the Non-agression principle, let alone the principle of property rights? Of course not. How about legal tender laws? Is it wrong according to libertarian philosophy to force people not to use any commodity they so choose to make transactions other than the state-decreed currency? Yes of course. Comparing and contrasting government policies (or anything else) with libertarian philosophy is a great litmus test of the validity of these policies. The second test, as if it were even necessary is what I call the consequentialist approach. In this test, one applies theory to estimate consequences of state actions, or can even more easily just step back and observe the results. Let’s take my earlier examples; minimum-wage laws, and legal tender laws. We know in theory the minimum-wage law is a price floor on labor, we also know through economic theory that price floors create surpluses, in this case surpluses of would-be employees who cannot find work. To boil it down minimum-wage laws outlaw certain employment opportunities and thus create unemployment. Legal tender laws eliminate almost all competition among banking institutions and thus among currencies as well, and grants government a monopoly on the creation and issuance of currency, which always leads to debasement of money, and of course spurs endless business cycles. So what our philosophical gut instincts tell us is confirmed by the results. So how do you get through to the statist who rejects the non-aggression principle and property rights altogether, and really couldn’t care otherwise? In my experience I’ve found that taking the consequentialist approach (at least at first to prove a point) is helpful in cracking the statist barrier, and here’s why. Statists reject the principles of libertarian, hence the reason they are statists, but what can one possibly reply in defense of laws with such horrible results; results that are often the complete opposite of what was supposedly intended? Not much at all. Statism uses the age old excuse that government’s tactics are for the greater good, that the ends justify the means and that “you have to crack a few eggs to make an omelette”. Trying to chip away at this philosophy with another is almost always futile. But pointing out indisputable evidence that the very results of a law or such that were so hungrily sought after, doesn’t match up in any way to what was intended, can be powerful. Once people can understand that violating the human right (to live free of coercion) has undesirable consequences, then are the odds of turning the “statist” quo highest.
The people who make efforts to, or at least purport to being “different” or “unique” are usually the ones who are the least unique, but the most uniform and compliant.
Resources are Scarce
The first concept to learn if one wants to understand economics is the concept of scarcity. Resources are not unlimited, as opposed to our wants and needs which are unlimited. We as individuals do not have an unlimited amount of time, energy, skills, land, materials and other resources that we use at our disposal. The study of economics seeks to determine the best way to use and allocate scarce resources in a way in which they are used most efficiently. And the best way to ensure that resources are used in the most efficient manner is to allow a free and unhindered market to function, with individuals answering the questions: “what will be produced?”, “how will it be produced?”, “and to whom will it be distributed?” Any time a central planning apparatus such as government “socializes” (controls the industry of) any part of the market place, consumers will not have their individual wants and needs satisfied. Ludwig von Mises called this the “economic calculation problem, or simply the “knowledge” problem. It is simply impossible for any one person or group of persons to have the knowledge or ability to coordinate production in such a way that consumers’ wants and needs are satisfied, let alone satisfied efficiently, but if resources were not scarce we wouldn’t be having this discussion anyway. Socialists and Austrians would not be having a debate about which method of production is most efficient in fulfilling people’s desires, whether it be a central planning authority or the free market, if everything we could ever need or want was always immediately available.
The very fact that resources are not in unlimited supply and availability derives the existence of cost. Cost is not synonymous to price. Price denotes the amount of commodities that must be given up to purchase something. “Cost” is the amount of resources that must be expended in order to attain some desired end. For example, my personal cost of gaining a paycheck from my place of employment is my time, labor, skills, energy, and benefits I would have gained had I not been working. Imagine a world in which just the thought of a soda immediately precipitates the cool refreshing taste and feeling running down your throat. This is the scenario of a world where resources are not scarce hence no cost, and is of course fantasy. Because of scarcity there is cost, because of cost we must expend resources to obtain further resources which can be manipulated into various goods and services that we use every day.