Tag: economic calculation

Bernie Sanders, You Can’t Just Give Everyone a Job

By Mason Mohon | @mohonofficial

Bernie Sanders is back in the headlines, and he has brewed an economic wonder concoction that will supposedly solve every single one of the left’s discontents. It all takes the form of the dear old Senator’s jobs plan.

As the Washington Post reports, Sanders wishes to roll out a federal plan that would guarantee a $15/hour job, along with health-care benefits, to anyone “who wants or needs one.” The plan is expected to help the environment, infrastructure, and education, along with a reduction in racism and sexism.

It is probably the perfect program.

And its perfection is its fatal flaw.

As of now, there is not a hint of a funding plan for this program, nor is there any idea how it would be implemented. Sanders is just laying out exactly the type of socialist rhetoric his base wants to hear.

Because Sanders is not going to bother looking at the consequences of his actions, we should. This program would be immensely costly. The unemployment rate is currently 4.1%. Hypothetically, if Sanders gave each and every one of these people a $15/hour job, and they worked 40 hours per week and 50 weeks per year, the total would come out to $3.69 billion per year, and this is just for the wages. This figure does not include administrative costs and any costs in implementation.

The program would be a profound burden on American taxpayers.

At the same time, it would misallocate money. The reason that not everyone is paid $15/hour in the status quo is because not everyone does work worth $15/hour. Many do not operate at a level of productivity that is worthy of such a wage, so a jobs program would give artificially high wages to people doing less-than-adequate work.

One may object that anyone can work that hard or that skillfully if the incentive is there, but that is untrue. Some people are just less skilled than others, and it is the way things are.

Jordan Peterson outlines the jobs issue very well. He explains that “no, there isn’t a job for everyone, and no, you can’t train everyone to do everything.”

He explains that because of I.Q. distributions, within our increasingly complex society, there “isn’t anything for 10% of the population to do.” He is referring in this instance to the cutoff point for joining the military, which is at an I.Q. of 83. iq_bell_curve.gif

There are not areas of the economy where such people cannot be sufficiently productive to earn $15/hour. It is a harsh reality, but it is a reality. Bernie Sanders seems to think that we can just shove everyone in a job and expect them to learn a skill, but people who are less productive would start out with a much lower wage than $15/hour in other sectors of the economy.

At the same time, Sanders’s plan would artificially boost industries that there is not necessarily demand for. As is the problem with all government production programs, the emphasis on infrastructure and education in the employment category leaves the potential for there to be overproduction in parts of the economy there is no demand for. The result would be a misallocation, and hence, and a waste of resources.

Keep in mind, all of his waste is coming out of the pockets of status quo American workers.

The fact of the matter, though, is that most of these consequences are long-term consequences, and the long-term is something the government rarely concerned with. Bernie Sanders especially.

To put it kindly, Bernie Sanders is not in his prime (assuming he ever had a “prime”). The Senator is 76 years old so he will not have to see the long-term consequences of any program he puts in place. Rather, he, like just about every politician, is primarily concerned with the short term. The short-term to them is the next election.

Politicians make moves to get themselves re-elected primarily. That is the number one goal, because without it other political goals are not going to happen. With this goal, though, comes a phenomenally high time preference. Politicians are incentivized to only look at the next election, so the lie, cheat, slander, and make promises they cannot keep.

Once they reach the age that Senator Sanders is at right now, it is a whole nother ball game. At his age, it is time to go for the big promises and ignore the long-term. Why would one look at the long-term when they will not live to see it.

Sanders has a jobs program that is good at heart; he wants to see the downtrodden reach new comforts. His method is not the proper method, though. Voters, especially young ones, need to be incredibly wary of older politicians making such grand promises.

Entrepreneurship is the best solution to our problems, not state intervention.

Featured image source.


Socialism Fails Due to the Lack of Economic Calculation

By Andrew Lepore | United States

In 1920, an article first appeared In the German Archive for social sciences which decimated the socialist economic model and laid the foundation for the Austrian price theory. Economist Ludwig Von Mises’s article, “Economic Calculation in the Socialist Commonwealth”, demonstrates the impossibility of a successful socialist economy. For this reason, it is one of the world’s most important economic articles.

At the time Mises published it, those in academia were debating the problem with incentive under socialism. The incentive to work as much as others, to work your hardest, to provide the best services, to do the jobs nobody wants to do, etc. Scholars and left-wing economists were attempting to solve the problem of incentive under socialism, and once they did so, they thought, they would have a system just as productive as capitalism.

By publishing this article, Mises answered their question by proving it is an impossible problem to solve. Mises demonstrated that the incentive which drives economic actions, both on the supply and demand side, comes from monetary reward. The cost-benefit analysis of the individual ultimately is how a person decides what they will do and how much they will work.

Similarly with what a person decides to buy, an individual will use their capital to purchase the object of most value to them at the least opportunity cost, or the least amount of money spent. The medium for all of this; for how we represent economic calculation that takes place in the market, how we determine profits and losses, and how we measure the cost and compare it to benefit, is through prices.

Prices emerge when there are many private owners of the means of production competing in the marketplace to convince consumers to spend their hard-earned capital on their product or service. Or in other words, prices emerge when many companies compete for the business of many customers by convincing them they can get the best product at the lowest cost ( The lowest opportunity cost for the greatest benefit, economic calculation).

Mises proved that socialism wouldn’t work because It cannot distinguish more or less valuable uses of resources. Nevertheless, with leftists being as hard headed as they are, the debate over the socialist calculation problem still rages on.

I recommend to all readers who want a deeper economic understanding of the failure after failure of government programs. It’s a short read, yet is full of information. It will arm you with economic facts to counter argument for statist programs, both on the left and the right.

“The significance of Mises’s 1920 article extends far beyond its devastating demonstration of the impossibility of socialist economy and society. It provides the rationale for the price system, purely free markets, the security of private property against all encroachments, and sound money. Its thesis will continue to be relevant as long as economists and policy-makers want to understand why even minor government economic interventions consistently fail to achieve socially beneficial results. “Economic Calculation in the Socialist Commonwealth” surely ranks among the most important economic articles written this century.” – Joe Salerno

Featured image source.

We Need a Separation of Art and State

By Mason Mohon | USA

Many aspects of American society have been rightfully viewed for centuries as outside the jurisdiction of the state. In particular, the separation of church and state protected by the first amendment of the constitution has gone more or less unabridged throughout American history. The United States Federal Government has fortunately restrained itself enough to let individuals live and let live in the world of religion, whether that means being Muslim, Mormon, Atheist, or Christian. This is because spirituality is important to the individual, and it is highly subjective, meaning that the cold non-discriminatory hand of arbitration extending from the state should not be involved.

It is important for individuals to experience truth for themselves, rather than it being forced upon them. People search for an emotional or spiritual truth within religion, but at the same time within articulation and writing of their thoughts, feelings, desires, and arguments. This is why we also have a separation of the press and state, so that information can spread freely. We have a freedom of speech in the U.S., paired usefully with a freedom to gather, which creates the potential for dialogue, allowing truth to arise through the exchange of thought between two or more individuals.

One instance, though, that we have not seen this clear line in the sand for the protection of free thought and truth pursuit is the arts. Art is an incredibly important aspect of humanity, society, and civilization. Jordan Peterson stated that paintings give the viewer a connection to the unknown, gripping them within. Artists find the balance between chaos and order and then express it within their art form. Leo Tolstoy said that “[a]rt is the activity by which a person, having experienced an emotion, intentionally transmits it to others.” Barbara Ernst Prey, an appointed member of the National Council for the Arts described art in the following way:

A lot of what artists do is tell stories. They help us make sense of our world, and they broaden our experience and understanding. The arts enable us to imagine the unimaginable, and to connect us to the past, the present, and the future, sometimes simultaneously.

Art is a phenomenal aspect of humanity. We do not fully understand it, for it is deeply ingrained in our emotional state. This ingraining, though, has serious implications. Something that is so tightly connected to our humanity should not have involvement with the state for various reasons. These reasons are the philosophical, political, and economic dangers of state involvement within the arts.

In the first place, as stated before, art is deeply tied to who we are as humans. It is made to connect with our deepest emotions, in a personal, subjective, manner. The state, though, cannot fit into this world. The state itself is a violent entity, for it receives all funding through either secretive and destructive inflationary methods or taxation (the taking of money from individuals through the threat of force). These two things will only mix as well as oil and water. It poses serious moral and ethical questionability to have such a powerful force (art) backed by such a destructive force (government). David Boaz, executive vice president of the Cato Institute, said that “art…is so powerful, dealing as it does with such basic human truths, we dare not entangle it with coercive government power.” It should be a serious red flag to ever suggest that beauty should be backed with violence.

Furthermore, it would be a dangerous game for the art world if it began to mess with politics. Furthering what Boaz said, there is another disadvantage to the entanglement of art with government power. Politics is a mess, for people on the left and right are constantly trying to fill it with their culture. Art, being a heavily cultural matter, should not be subject to the whims of whoever has control of a state agency. When the public funding of the taxpayers is involved in the promotion of art, controversial questions of what kind of art should be funded arise. Should gay characters be allowed in publicly broadcasted TV? Should brutal violence be allowed? Should the horrors of slavery be revealed? Should possibly offensive language be censored? Any answer to any of these questions will go against the convictions and cultures of one taxpayer or another. Boaz continued by saying that “[t]o avoid these political battles over how to spend the taxpayers’ money…we would be well advised to establish the separation of art and state.”

The economic side of the issue should also be looked at. Lawrence Reed, president of the Foundation for Economic Education, said that “expecting government to pay for the [art] bill is a cop-out, a serious erosion of personal responsibility and respect for private property.” The free-marketers are seen as enemies of the art world because we do not support “public funding” for the arts. This could not be further from the truth, for, aside from the political and philosophical issues with state-funded art, there are various economic issues. Money taken from individuals through taxation is money that cannot be spent on something else. Every dollar the state takes from someone is one that can not be spent on something that they may have actually wanted, which could, of course, include art museum or theater tickets.

“Public” government investment almost always comes with strings attached. There will be some sort of political manipulation that erodes the integrity of the art world. At the same time, public investment always has the potential to displace private investment. The danger of a publicly funded art program is the same as any other publicly funded program. When funding is guaranteed, the price tends to increase while the quality tends to decrease. In a demandless publicly funded art world, this issue will only manifest itself in one of the most important parts of human existence.

When art finds voluntary funding, it is because people wanted it. When it finds public funding, there is no way to know if people wanted it with the same degree of accuracy that the market provides. Public funding and state involvement in the world of the arts is dangerous for many moral, political, and economic reasons. Art lies in the same interhuman space that speech and religion tend to inhabit. These things should all then be treated the same; they should all be treated as too good for state control.