The Economic Lesson Obama Needs to Learn

Freedom, not regulation, is what the U.S. needs right now.

President Obama is again turning his attention to the elusive economic recovery. His “pivot” will be for naught, however, as long as he continues to ignore two important points: first, government is a major squanderer of scarce resources, and second, its regulations are impediments to saving and investment.

We live in a world of scarcity. At any given time our ends outnumber the means to achieve them. Hence we economize so that we can achieve as many of our ends as possible. Resources, labor, and time devoted to one purpose can’t also be used for other purposes, and the alternative forgone is the true cost of any action. We individually choose among competing ends after assessing the trade-offs, because we don’t want inadvertently to give up something we prefer in exchange for something we don’t value as much.

The marketplace, when it’s free of government privilege and regulation, lets us accomplish this to a remarkable degree. In doing so, it raises our living standards and creates an orderly environment, thanks to the price system, which coordinates and facilitates our plans.

Government throws this process out of whack. When politicians forcibly extract resources from us (through taxation) and borrow, they leave us less with which we can improve our lives through entrepreneurship, business formation, and the like. But, you may ask, aren’t the politicians’ projects worthwhile? Actually, many government projects are of zero value or worse. The costly global empire is beyond useless: it endangers us. Other projects might be useful, but — and this is key — we can’t be sure, because they are not subject to the market test.

If a private entrepreneur acquires resources in a quest for profit, she must create value for consumers or she will fail. The market’s profit-and-loss test will see to that. That test is administered by countless millions of consumers who are free to take or leave what the entrepreneur offers. This test is relayed back to the investors who lend money to entrepreneurs for productive ventures. They know that if the entrepreneur fails, they will also suffer losses. So they must scrutinize projects in terms of their potential, ultimately, to please free consumers.

The upshot is that consumers’ uncoerced actions signal (through prices and profit/loss) what pleases them and what does not. Suppliers must pay heed or face bankruptcy. This explains why markets, when not burdened by government privileges and arbitrary rules, work so well to raise living standards.

Note how government projects differ essentially from market projects. Politicians and bureaucrats obtain their money through force, not consensual mutual exchange. (What happens if you tell the IRS you don’t want to purchase its “services”?) Even the money obtained through voluntary loans is expected to be repaid with the taxpayers’ money. It’s taxation all the way down.

Moreover, government “services” are not offered in a competitive market where consumers are free to take them or leave them. Since we’re forced to pay a monopoly provider regardless of whether we want the “services,” at the point of delivery they appear to be free. You can’t opt out of paying for “free public schools” even if you don’t want to use them. Everyone pays into Social Security, a (meager) pension plan, under threat of force. In other words, government services are not true services in the market sense because they face no market test from consumers free to withhold their money without penalty.

The market test assures that bad trade-offs are avoided, or at least quickly corrected if they are made. If steel is being used to make one product when consumers are demanding something else, the competitive entrepreneurial process sees to it that steel will be redirected.

No corresponding process exists in the political realm. It contains no incentives to look out for the consumers’ welfare. Instead, we have political theater and value destruction.

This would be bad enough, but it’s actually worse. What government does with the stolen resources typically makes it harder for us to use the remaining resources productively. Uncertainty about future taxation and regulation, for example, increases the risk of investment and hence reduces it.

An indispensable prerequisite of economic well-being is humility on the part of politicians. How about it, President Obama?

This article originally appeared at the Future of Freedom Foundation.

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  • wareagle||

    Sheldon,
    what you see as bugs, Obama sees as features. You write as if he has a problem with the two points that begin your piece. Come on, man; after five years?

  • mr lizard||

    OT but equally derpy

    http://www.tampabay.com/news/b.....in/2133463

    FTA
    "Celestar defense firm chief executive officer Greg Celestan wanted to bring two younger associates to the Tampa headquarters from his firm's office near Washington, D.C. When they said they wanted to live somewhere without relying on a car, he told them to stay there."

    The newspaper here is absolutely determined to spend all of my money

  • Ted S.||

    Get rid of parking passes for government-sector workers. Make them park miles away and use mass transit or walk the rest of the way.

    They can go first in the grand experiment.

  • Jerry on the boat||

    ...they wanted to live somewhere without relying on a car...

    It takes a special kind of masochist to enjoy mass transit.

  • VG Zaytsev||

    Best and Brightest.

  • Scarecrow Repair||

    Naw, it's just a trade-off. When I was a kid, i walked everywhere and detested bikes because I had to drag them around with me and it restricted where I could go. I lived in a big city for ten years and enjoyed not having a car to drag around. But eventually I tired of the crowds and lack of privacy, and it's just a different life.

  • Nooge.||

    I've met a lot of people who share that sentiment, and I think they're batshit crazy.

    To be fair, a lot of them were city-bred and raised, so it is probably how they are accustomed to living. As a country boy, the idea of not having a vehicle (not even a family vehicle) always sounded ludicrous to me.

  • ||

    I am calling bullshit on that.
    Young people who don't want cars. They probably hate sex too.

  • Zeb||

    In large dense cities, I don't see why not. Why get a car when you live in a place where it is hard to park, traffic is terrible and it is expensive to insure a vehicle and you can get anywhere you want on a bus or train and drink as much as you want to when you are there? I'm not wild about city life and I wouldn't want to do that all the time, but I can see why people would choose not to have a car in densely populated cities with well set up subways or busses.

  • Rights-Minimalist Autocrat||

    Yeah. I've been to Hong Kong, and wouldn't want to own a car there. Not worth the hassle. Not sure if I would have said the same thing when I was 20, though.

  • Brian D||

    And the following paragraph:

    Florida Blue regional chief David Pizzo sees an improving economy that must soon handle hundreds of thousands more people moving to Tampa Bay. But he sees little progress toward a regional mass transit to meet the coming demand. "We are setting ourselves up for potential failure," Pizzo says. "In five to 10 years, do we want to become a gridlocked city that no business wants to go to?"

    Nobody wants to move here! And furthermore, too many people will soon be moving here!!!

  • wareagle||

    shades of Yogi Berra and his remark about a restaurant: no one goes there anymore because it's too crowded.

  • mr lizard||

    Translation: we already have enough dependent blue team players to keep my buddies in office, but now we need some employed guilt stricken team players so we can keep the lights on.

  • VG Zaytsev||

    So proggie poliwogs now irrationally fear guns and cars.

  • Killazontherun||

    They always were from the time they were born. Things that go boom boom make a big boom boom in their pants.

  • RightNut||

    The Economic Lessons Obama Needs to Learn

    FIFY

  • Aloysious||

    The lessons I wish that man and others of his ilk would learn?

    1. Reality always wins.

    2. See #1

  • ||

    Cue Tony and Shreek

    ROOOOAAAADDDZZZZZZZZZZZZZ!!!one1!!Eleventy!!11

    Also, calling social security a pension plan is a bit like calling a mugging a charitable contribution.

  • Jordan||

    Cue Shriek: S&P 50000000000000!!!1

  • ||

    Cue Shriek:

    Dude, that was fucking AWESOME! Too the minute! All hail Jordan's mystical powers to summon the beast! er...well...I guess...

    Second thought...NEVER DO THAT AGAIN!

  • ||

    To

    *hangs head in shame*

    edit button

  • Agammamon||

    Never summon up that which you can not put down.

  • Palin's Buttplug||

    You don't read my comments, do you? I have NEVER argued for more infrastructure spending to stimulate the economy.

    I am 100% for market solutions. But like Hayek I do accept some regulations on the market (like not poisoning citizens via pollution).

    That is why the Peanut Gallery here calls Hayek and myself "leftists".

  • ||

    (like not poisoning citizens via pollution).

    Poor Obama. Getting cockblocked at every turn by Team Red libertarians who want to poison people.

    You are so far beyond parody that you've almost become a parody of a person beyond parody. Parodyception?

  • Palin's Buttplug||

    Idiot. I remember when Obama held BP liable for their Gulf oil disaster. The Peanut Gallery went ballistic - "OBAMA IS SHAKING DOWN BP!".

  • ||

    I remember when Obama held BP liable...

    Generally that's what courts are for - not TV press conferences with the executive. The Peanut Gallery has this silly hangup about stupid shit written over 100 years ago by slave owning white men, like "separation of powers".

  • Palin's Buttplug||

    BP volunteered for the settlement.

    End.

    Now if I had been POTUS I would have said "Listen, you murderous cockroaches, you make this right or all your millions of other oil leases are void."

    BP fucked up, admit it. Halliburton just admitted guilt as a sub. It was well played in the end because a small amount of hide was extracted for restitution.

  • sgs||

    "BP volunteered for the settlement.

    End."

    Except it wasn't and they didn't.

    http://fuelfix.com/blog/2013/0.....ims-fight/

    I love when you make a fool of yourself.

  • Sevo||

    "I love when you make a fool of yourself."

    You're going to have a LOT of good times.

  • seguin||

    Yup, because a single person using the regulatory state to bend people to his will outside of the justice system is libertarian as fuck.

  • Killazontherun||

    seguin| 7.28.13 @ 11:02AM |#

    Yup, because a single person using the regulatory state to bend people to his will outside of the justice system is libertarian as fuck.

    I'm not use to your handle, but I'm already going to like you.

  • ΘJΘʃ de águila||

    But instead the sick bitch of a POTUS issues FATWAS on Assange and Snowden. On one hand he recklessly murders Muslim children all over the world, then turns around and acts like an Al Qaeda leader.

    He doesn't have time for much else, besides paying off his billionaire bank buddies and military contractors.

  • PH2050||

    I'm still waiting for all the anti-war protests and stuff we saw during BOOOOOSSHHH!!!11

  • Gozer the Gozerian||

    Are you saying that Shreek is Peak Retard Parody?

  • ||

    But I dream...

  • Jordan||

    And yet you gobble up every 10,000 page abomination the Anointed One shits out.

  • Sevo||

    "That is why the Peanut Gallery here calls Hayek and myself "leftists"."

    Don't flatter yourself, dipshit; Hayek you ain't.

  • VG Zaytsev||

    But like Hayek I ...

    Hayek spent all of his time fellating Obama and other socialists too.

  • NotAnotherSkippy||

    The more direct analogy would be: it's like calling Madoff an investor. But it's not a Ponzi scheme if backed by future taxes... right. And you can carry twice as many canaries if half are flying in the (sealed) truck.

  • Incredulous||

    It would have been a simpler article if it was titled "the economic lessons Obama doesn't need to learn." But then there wouldn't be an article.

    Why even write anything about this loser? It makes just as much sense to write about what he says. He's a pathological liar and a completely self-obsessed moron.

  • Palin's Buttplug||

    Still butthurt Santorum isn't POTUS?

  • ||

    Well duh. Libertarians generally, and Reasonoids in particular, are all team red shills CHRISTFAGS! who were torn between Santorum and Huckabee.

  • Palin's Buttplug||

    Hey, I voted for Gary Johnson so you can't fuck with me. (I did vote for Obama in 2008 and don't regret it one bit)

  • ||

    (I did vote for Obama in 2008 and don't regret it one bit)

    Whoah, I'm shocked. It's hard to believe considering your unimpeachable libertarian bona fides and fiercely independent political viewpoints.

  • Palin's Buttplug||

    The GOP cannot be punished enough for 2001-09.

  • ΘJΘʃ de águila||

    You are right, but voting for another war-mongering religious nut like Obama is a fucked up way to approach punishment.

  • Jordan||

    We can fuck with you all we want because you get so butthurt everytime someone insults your Messiah that all you can do is desperately flail around and throw out tu quoque attacks.

  • Palin's Buttplug||

    No, you morons think that Obama invented NSA spying (for example) when all the legal groundwork was laid by the previous administration. But you don't remember that. Then the moron brigade says OBAMA IS THE WORST EVER!

    But it is NO FAIR to point out Bush did all the legislation to make NSA spying legal and even performed the surveillance while it was ILLEGAL.

    "No Fair! You can't call out Bush!"

  • Jordan||

    No, you morons think that Obama invented NSA spying (for example) when all the legal groundwork was laid by the previous administration.

    Strawman.

    But it is NO FAIR to point out Bush did all the legislation to make NSA spying legal and even performed the surveillance while it was ILLEGAL.

    Who said it's not fair? It's fucking irrelevant and a thinly veiled attempt to deflect criticism from THE GUY WHO'S ACTUALLY FUCKING DOING IT NOW YOU FUCKING RETARD.

  • Dweebston||

    You do understand the BOOOOSH jokes at your expense aren't denials but jabs at the idiocy of holding the previous administration's feet to the fire five years later, and your failure to advance the argument even after we've made it abundantly clear nobody but a token couple blue-baiting quasi-republicans are willing to support him concretizes the general perception of you as a trolling doofus... right?

  • ΘJΘʃ de águila||

    Paranoid PB fears non-existent Bush supporters under his bed and in his closet. Where are the Bush supporters on this forum? I don't see many. FUCK.

    Meanwhile Obama is really spying on PB's every move. But, since PB is doing nothing wrong, it's all okay.

  • Sevo||

    Palin's Buttplug| 7.28.13 @ 10:34AM |#
    "No Fair! You can't call out Bush!"

    No, dipshit, you're not that stupid, you're that mendacious.
    No one here is saying you can't call out
    BUUUUSH, we're saying we're tired of you blaming BUUUUSH for every fuck up by that lying asshole in the white house.
    And he's had 'way more than BUUUSH, BTW.

  • ΘJΘʃ de águila||

    I get it:

    Quit picking on Obama and let him do his job!

    Now that's about it, right?

  • VG Zaytsev||

    But it is NO FAIR to point out Bush did all the...

    Yep, Obama has just continued all of Bush's policies and ramped them up. Which is why proglodytes love him so.

    ...legislation to make NSA spying legal and even performed the surveillance while it was ILLEGAL.

    Frankly, it was better for it to have been done illegally because fear of getting caught would circumscribe the behavior of the bureaucrats running the
    NSA and there was a chance that public outrage would end it.

  • ||

    I think it is worth pointing out that it is still illegal.

  • VG Zaytsev||

    Obama says it's not illegal when the president does it

    Sounds vaguely familiar, but last time the press jumped all over the pol that said it. Now they lick his balls.

  • Inigo M.||

    Did you never attend elementary school, PB? Somewhere around the 2nd grade, I remember learning that two wrongs don't make a right.

    Who give a fuck that Bush invented NSA spying on everyone? No one here is letting him off the hook for that simply because they are blaming Obama for continuing it.

    Both administrations are equally culpable for falsely inflating fears post-9/11 in a deliberate ruse to seize more power over all citizens and continually violate the Constitution they were sworn to uphold.

  • ||

    I love when you get all butthurt, you disingenuous demfag.

  • PH2050||

    How can you not regret it? I'm ashamed I let my revulsion at McCain's warboner cause me to vote for this clown in 2008. That was before I had really heard of libertarian ideas. What's your excuse?

  • DK||

    Shrike has no regrets in the same way his hero, Soros, has no regrets about helping in the Nazi deportation of Jews. He says he's voted libertarian since 1988 (with the exception of 2008). His excuse boils down to CHRISTFAG! He has a visceral hate of not just religion, but religious people.

  • Redmanfms||

    He has a visceral hate of not just religion, but religious people.

    Unless they are named Obama and were members of black racialist hate cults for decades.

  • Rich||

    Talking about his campaign manager quitting, Weiner said "More people have come on frankly."

    Even Anthony himself is getting into the spirit!

  • ΘJΘʃ de águila||

    OUCH!

  • Inigo M.||

    Weiner knows he is bound to face a long and hard campaign. While he may yet rise to the occasion, I'm betting he will pull out.

  • John C. Randolph||

    Sheldon mistakenly assumes that Obama cares whether people are hurt by government interference in their lives. There's nobody more selfish than a power-seeking politician.

  • Gozer the Gozerian||

    I always like to imagine politicians as Harry Lime.

  • The Late P Brooks||

    Axelrod stumbles over the truth, wobbles rapidly away; "There's a pathology involved" in politicians' behavior.

    No shit, Dave. The compulsion to wield power over other people is an aberrant mental condition.

  • The Late P Brooks||

    Quinn, candidate for mayor, says, "When I'm mayor, we'll have a kinder, gentler Stop and Frisk. But gosh darn it, we need to keep our boot on the neck of people who don't work in the financial services industry."

  • Inigo M.||

    "A kinder, gentler Stop and Frisk?" Does that mean that, provided no weapons or contraband are found, a happy ending will complete the Stop and Frisk?

  • PapayaSF||

    This is the woman whose office had to fitted with extra soundproofing because of all the screaming she did at subordinates. Classy.

  • The Late P Brooks||

    Some idiot on ABC just said it's impossible for the NSA to listen to phone calls without a court order. At least one of us doesn't understand the difference between technological capability and permission.

  • ΘJΘʃ de águila||

    Is that still a major network?

  • Sevo||

    According to the NYT:
    "Striking a feisty note at times, he vowed not to be cowed by his Republican adversaries in Congress and said he was willing to stretch the limits of his powers to change the direction of the debate in Washington."
    See, the problem is he doesn't have sufficient power!
    http://www.sfgate.com/politics.....691324.php

  • ΘJΘʃ de águila||

    Ooooh, feisty! Stretching the limits, Oooooh!

    "Excuse me this press conference must end, it's Drone-Kill Tuesday, and I must make some selections from the Assassination Matrix.

  • VG Zaytsev||

    Republicans in Congress secretly agree with Bammy, and only oppose him because they fear their constituents.

    If only those pols would ignore the voters that elected them, like Bammy does his voters, then Bammy could get everything he wants.

  • ΘJΘʃ de águila||

    "Make no mistake, I shall not be cowed by the likes of Rand and Amash! I shall topple Assad, predator-drone Snowden and nuke Iran whenever Diane Feinstein and James Clapper give the word."

  • The Late P Brooks||

    OH, NOOOOOO! Massive budget cuts!

    Those crazy Republicans.

  • The Late P Brooks||

    Nice. The sleazy little crook Rattner says a couple billion dollars sprinkled over Detroit like magical fairy dust would be no big deal. It's peanuts, you know.

  • VG Zaytsev||

    Yep, Detroit's problems have nothing to do with their government. They're just the victim of 'market forces'. And Kochs.

  • NotAnotherSkippy||

    And Venezuela doesn't have toilet paper because of the failure of capitalism.

  • Gozer the Gozerian||

    Does "be no big deal" mean "have no effect"?

    I mean, I hate to agree with him, but...

  • Inigo M.||

    Arrogance is the root of the problem. To be open to learning any sort of lesson requires a certain amount of humility -- the realization that, for all your knowledge, there is always more to learn and possibly even un-learn.

    In addition to ideological blindness, this is a man who has apparently been surrounded by sycophants his entire life and who has been held up as some kind of savior/genius. It's not entirely his fault that he has come to believe his own press. If the economic remedies he has tried do not seem to be working, the only thing it can possibly mean is that they have not been tried intensely enough or long enough. That they might possibly be misguided to be with is not even a remote possibility in his mind.

  • Inigo M.||

    ...be misguided to BEGIN with...

    What I meant to type. Sorry.

  • Sevo||

    Stop the presses!
    Did you know most people worry about money some time in their lives?!
    Well, it comes as a shock to AP:
    "Four out of five U.S. adults struggle with joblessness, near poverty or reliance on welfare for at least parts of their lives,"
    Pretty sure the number is 4.9 out of 5.
    http://www.sfgate.com/news/pol.....691668.php

  • The Late P Brooks||

    Four out of five U.S. adults....

    I tried to read that at WaPo, but they have it split up into at least four pages, with no "printable version".

    Fuck you, WaPo.

  • Sevo||

    It's not worth reading; it's one of those 'we make up the definitions and then we claim X people fit them'.
    Like 'food security'; were you hungry once? You lack 'food security'

  • NotAnotherSkippy||

    Or 60% of bankruptcies are caused by medical bills. Of course they define "caused" as having ANY medical expenses at the time of filing for bankruptcy even though medical bills only account for

  • OldMexican||

    Re: Palin's Buttwipe,

    I am 100% for market solutions. But like Hayek I do accept some regulations on the market.


    Besides being a liar, you're not even competent enough to formulate logical arguments. If you're "100% for market solutions" while at the same time being in favor of "some regulations," then it is clear you can't be for 100% market solutions. The two statements are contradictory.

    And you keep asking why people here don't take you seriously?

  • johnqpublius||

    This is one of the most concise and understandable explanations of how and why free markets work, and how and why government spending and investment so often doesn't, that I've read in a long time.

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