Sep 09 Economics by the Gallon

As I see it, much of the trouble we have in this country is due to ignorance of basic economics.  It wasn't just the Declaration of Independence that gave us our heritage and prosperity.  It was also Adam Smith's The Wealth of Nations that helped codify the thinking of our Founding Fathers.  For indeed, the historical precedents - feudalism, mercantilism, and of course socialism - are simple in concept, even the bad parts.  Greed was the supposed enemy whose restraint justified their obvious limits on opportunity and personal freedom.

How can a system like capitalism, with greed at its core, possibly succeed?  And yet it does, thanks to the "invisible hand" that Smith coherently identified as a tangible, beneficial force in human endeavor.  Indeed, capitalism - the free market - is the only one consistent with and supportive of liberty, as so many writers and scholars have echoed through the centuries since.

With the fall of communism, many of us had thought the question settled economic science. And yet, it was little more than a "dirge of triumph" as George Gilder called it in Wealth and Poverty.  When the going gets tough, when the situation calls for a return to more capitalism, we somehow wind up with the long debunked thinking of Keynes and Marx.

But on a micro level, we get it.  Take for example how government price fixing in Wisconsin affects our decisions.  Read the reader comments in particular, where one notes "I fill up in Duluth because I know the prices will be 10 cents higher in WI."  This is standard practice in border towns, seeking the cheapest gas, or where clothing is not taxed for example.

Still more interesting was this comment, edited for clarity:

When traveling from Minnesota to South Carolina or Minnesota to Massachusetts I never buy gas in Wisconsin. Gas at the Belvidere Oasis in Illinois is cheaper than any gas in Wisconsin. Furthermore, after midnight you can't find gas in the Madison area.  You have to make it to Janesville which says to me they know folks aren't buying gas in Madison. I fill up when i leave Minnesota or at the last gas in Illinois so i don't have to stop in Wisconsin for gas.

Another commenter says he buys Wisconsin gas to avoid the mandated Ethanol content in Minnesota gas.  It works both ways, everyone making the choices they most value, those permitted by law.

We as consumers are annoyed with specific government interference with products and services we frequently buy.  We readily see and work around the reduced quality and shortages generated, and of course the high prices.  And yet we are somehow comfortable with letting governments run our schools or provide health care.  This is where education is needed, to use these real life small examples to help correct our large scale thinking.

The first thing to correct in my opinion is the perception that socialism or other "collectivist" systems are somehow more sophisticated, even elegant when the proper minds are managing its complexity.  No, quite the reverse is true.  It requires a more educated mind to understand capitalism and its many benefits over the simplistic concepts of a "planned" economy too many of us settle for today.

Cross-posted and comments welcome at Speed Gibson.