Economics Made Clear


The Government against the Economy, by George Reisman, Ottawa, Ill., and Thornwood, N.Y.: Caroline House, 1979, 207 pp., $12.95.

While the intellectual economic climate in the United States is slowly changing in the direction of economic freedom, the momentum of government intervention continues unchecked in its rush to keep up with established policies. Evidence for the former assertion can be seen in the recently enormously popular book, Free to Choose, by Milton and Rose Friedman. The recognition of F.A. Hayek with a Nobel Laureate citation—almost unthinkable to those of us who discovered classical economics in the '50s—gives the standard-bearer of the free market hope for the future. The great works of Ludwig von Mises are present on library shelves now, indicating a shift in thought by those who, but a few years ago, gave acknowledgment only to Keynesian progeny.

A worthy addition to these books is the relatively slim (200 pages) but incisively relevant examination of how the government is screwing it up, not only here at home but throughout the world. George Reisman spells out—in the area of oil markets, housing, and the money supply—just how the government is destroying the productivity of the entrepreneur and how the government does its damage to millions of people when it intervenes.

By explaining through direct illustration in many markets and production processes, the fundamental economic laws of supply and demand, Dr. Reisman gives us Economics 101 as it should be taught. Reviewed are the concepts of profit: how they equalize when entry into the marketplace is unfettered by regulation and government constraints; how wage rates also equalize as mobility, job demand, scarcity of skills, and marginal opportunities converge on the marketplace where profit is generated; how prices are governed by the costs of production. All of these economic principles, and more, are given the depth normally associated with the classicists but are immediately graspable through succinct example.

Understanding these economic laws, we begin to see the distortions, corruptions, and general inefficiencies that are inevitable when the government attempts to control any aspect of the production-consumption network. Most notable are the discussions of New York City housing. The apologists still blame slumlords, callous bankers, an uncaring federal housing authority, and the "failure" of the marketplace for the abysmal shortages and condition of that area. Rent control, they aver, is the only thing that keeps New York habitable; without it, prices would go "out of sight."

Reisman also shows how the US government, not the irrational caprice of OPEC, has caused the oil shortage we have today. His material is timely, including the wage and price controls, the false alternatives of scarcity-or-rationing as the propaganda swindle so popular with party liners, the attack on oil company profits, and the grotesque intrigues of government officials trapped into actions that make the problem worse, not better.

If these distortions of the marketplace are caused by partial intervention, what must life be like in a socialist state like the Soviet Union? We get some glimpses: the never-ending lines for consumer goods when no one even knows what they are lining up for; the social structure of a class system so bound and constrained that mobility in any form is not only impossible but illegal; the enormous inefficiency, which resurfaced recently when the Central Planning Board of the Soviet Union admitted that an entire tractor factory had been faked on paper (the fire marshal was certain no hazards existed, since there was no factory in which a fire could occur). Famines; scarcity of everything as a way of life; informants examining your every move, since the only way to obtain subsistence is by turning in your acquaintances; the ever-present threat of labor camps and death if you don't conform—these are the direct consequences of the doctrine, "From each according to his ability, to each according to his need."

What George Reisman has given us is an excellent abridgement of von Mises, Hayek, Henry Hazlitt, and other contemporary economists, with the facts of the marketplace today, all showing how the identified principles of the free market serve the consumer and the world so much more than the arbitrary hammer of government meddling. This isn't a new message. It is an update and a reapplication of principles to a morass of governmentally caused economic contradictions. Its greatest value is its clarity of explanation. It helps us in the identification of new enemies of personal, political, and economic freedom.

Howard McConnell is a medical electronics consultant who lives in Evanston, Illinois.