Economics is the new American religion. Disagree with the mainstream narrative surrounding it, and you’re a heathen needing quick conversion. No longer is it seen as a social science requiring unbiased scrutiny: it’s about giving people what they think they want, no matter the cost.
And the cost they take in doing so is a big one: people’s prosperity.
I recently sat down with Dr. Peter Boettke, professor of economics and philosophy at George Mason University, to discuss what needs to happen to reverse the problem of people turning “to politics for a sense of truth,” as he puts it. He explains the problem this way: “When my truth is not being listened to, my only recourse is to impose truth on others who are peddling in falsehood.”
He’s correct. This desperate need to control is what leads to the government being placed on a pedestal as the Almighty solution rather than being viewed as a tool to preserve liberty. And there’s a need to use economics to tradeoffs of proposed solutions. When people aren’t allowed to disagree concerning economics and more policies are pushed on them as gospel, Americans are left with less opportunity for accomplishing extraordinary things.
Instead of getting caught up by culture concerning economics, we need to return to the four pillars as defined by Boettke that substantiate this social science and contain the basis to achieve prosperity.
Pillar One: Truth and Light
The truth is that we live in a world of scarcity. This reality sheds light on the truth that because of scarcity, we must make tradeoffs to attain our goals. For most, this looks like trading your scarce time to work and earn money for scarce goods. Many today argue that not everyone can work or should be required to do so, which leads to petitioning Capitol Hill to pass policies that reduce the need to work.
Lawmakers can pass one policy after another, but that will never change the inherent “dignity of work” as Boettke puts it. And respecting people’s agency gives them dignity.
Pillar Two: Beauty and Awe
We live in a world of spontaneous order. In every century, it’s beautiful and awe-inspiring to see how voluntary activity results in the spontaneous order that leads the way to the formation of global markets through which we thrive today.
To achieve this phenomenon, it’s essential that individuals are empowered to work and contribute to society. Governmental policies that impose economic barriers cannot produce the same orderly result that emerge when people are permitted to achieve their hopes and dreams through a system of free markets and limited government.
By latching onto the cultural ideology that the government and not the individual must work to solve all economic woes, we move further away from personal responsibility and deeper into the crippling dependency mindset. A mindset that convinces people they are powerless instead of possessing the tools required to flourish.
Pillar Three: Hope
Economics gives us hope of changing our circumstances. Through capitalism and entrepreneurship, we can have hope in civil society as the first resort while the government is the last resort in reducing poverty by encouraging long-term self-sufficiency.
This was one of the major downfalls of governments across the country in 2020.
By shutting down the economy and deciding which businesses were essential, small business owners and entrepreneurs were sidelined, leaving them fewer opportunities and less hope of climbing out of the government-imposed economic crisis. And less hope for those locked into their road to serfdom.
Pillar Four: Compassion
Economics at its core takes compassion on the impoverished and disadvantaged, seeking to lift them up. “It’s not about making the wealthy better off but about how we can lift up the poor [so that] the poor get richer even faster than the rich get richer,” Boettke explains.
If people understood economics under these four pillars, rather than viewing it as a list of technicalities with which to police people, more progress would prevail.
Governmental barriers imposed in our lives may be in popular demand but they are not the proposed solution among the American entrepreneurs fueling the economy. As Matt Ridley writes, “Innovation is the child of freedom and the parent of prosperity.”
When seeking economic solutions for the nation, the path forward should be about how best to provide opportunities to let people prosper by removing barriers, respecting individual agency, and allowing hope and compassion to be cultivated in communities. That’s achieved by enhancing and preserving liberty through limited government and a flourishing civil society. Otherwise, we’re destined to fail the lessons of economics.
Vance Ginn, Ph.D., is founder and president of Ginn Economic Consulting, LLC. He is chief economist at Pelican Institute for Public Policy and senior fellow at Young Americans for Liberty. He previously served as the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20.
READER COMMENTS
Peter Gerdes
Oct 23 2022 at 1:52pm
That’s a big reason I’m a huge advocate of UBI. Give everyone a compassionate floor and it becomes much easier to make the argument against excessive employment regulation and to give ppl greater freedom to make voluntary choices.
David Henderson
Oct 23 2022 at 2:10pm
How do you handle the fact that even eliminating all means-tested programs at the federal level and replacing them with a $10K annual UBI would increase federal spending by approximately $1 trillion annually?
vince
Oct 23 2022 at 11:05pm
The cost depends on how its implemented. In one version, UBI replaces other transfers to the poor. No welfare, no food stamps, and so on. An advantage is that people on such programs are given an incentive to work. The perverse cliff effect is eliminated. Not only are the poor given an incentive to work, but the bureaucracy administering those perverse programs can be eliminated.
Kevin
Oct 23 2022 at 6:10pm
UBI seems a bit silly because of it’s universal nature. Why not a basic income with a negative income tax?
Kevin
Oct 23 2022 at 6:12pm
That should read “its” not “it’s.”
robc
Oct 23 2022 at 8:25pm
UBI and negative income tax ate mathematically the same thing.
Kevin
Oct 24 2022 at 1:18am
That’s true for recipients, but isn’t the net cost for UBI substantially higher?
vince
Oct 24 2022 at 2:03pm
They may be mathematically the same–if you ignore the incentive to work under UBI and the incentive to NOT work with a negative income tax? And if one does choose to work under a negative income tax, the much greater incentive for cheating, if just by understating income or overstating deductions?
There’s a negative income tax right now. It’s the Earned Income Credit. Fraud is so bad the IRS had to impose special rules and penalties for cheating. And the cheating continues.
vince
Oct 23 2022 at 11:17pm
The article mentions free market and limited government. What do those terms even mean? In the history of the world, has there ever been free markets?
andy
Oct 25 2022 at 11:03am
Free market means that there exist extensive private property, the property rules are generally successfuly enforced, fraud is prohibited and people are free to exchange goods/services and enter into the contracts as they wish.
Yes, there are many areas where this is true, the e.g. the IT market in general is pretty free. I find that question quite weird though as it seems to me akin to ask ‘Has there every been a society with no fraud or theft?’. No, there wasn’t. So what?
vince
Oct 25 2022 at 6:13pm
That’s my point. You define it with vague terms like extensive and generally. And you mention fraud being prohibited, but then admit every society has fraud.
Anyway, I was referring to countries rather than particular market segments. IT is an example of free markets? With huge monopolistic or oligopolistic firms like Google, Microsoft, Apple, Facebook?
Free market may be sent as one particular definition but received as a much different one. Same with socialism.
nobody.really
Oct 24 2022 at 3:18am
Its ennobling quality of work seemed to have been lost on the Ancients. “Most of the arts,” says Xenophon, “weaken the body; those who practice them must sit in the shade or by the fire; they have time neither for their friends nor for the republic.” Plato wants the laws to punish any citizen who engages in commerce and this the laws of Lycurgius did at Sparta. According to Aristotle, it was only with the corruption of certain democracies that artisans attained the status of citizens, and he maintains that a good republic will never grant them civil rights.
St. Thomas, following Aristotle, says that commerce has certain baseness (turpitudo) about it, because it is not, of itself, directed to any honest or necessary end (although it can be). He notes that nothing prevents a merchant from ordering his profit to some other honest and necessary good, and so profit is licit. He qualifies this by says that when someone orders the moderate profit he seeks by business to the support of his household or to help the needy, or even when someone is in business for the benefit of the public, so that his country will not be lacking in the things necessary for life, he is not seeking profit for its own sake, but as the rightful fee for his labor.
The Jacobins were of the same mind, Saint-Just declaring that “Trade ill becomes the true citizen. The hand of man was made only to till the soil and to bear arms.” And Napoléon’s description of the British as “a nation of shopkeepers” was not intended as a compliment.
(h/t Michael Paterson-Seymour, Scottish attorney and contributor to First Things)
nobody. really
Oct 24 2022 at 3:56am
I share Kevin’s understanding that a universal basic income is universal—that is, not targeted only to those who demonstrate need. In contrast, a negative income tax would be targeted only to those who demonstrate need by reporting an income below some threshold amount.
People have long debated whether to pursue universal programs, or to target programs exclusively for the needy. See Elizabeth Popp Berman’s Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy (2002).
For example, Milton Friedman initially advocated a negative income tax:
Milton Friedman, “The Case for Negative Income Tax: A View from the Right” (1966). But he may have changed his mind:
Milton Friedman, “The Only Solution Is Competition: An Exclusive Interview with Milton Friedman” (December 1, 1998), (emphasis added)(discussing education vouchers)
Others have also adopted this latter view:
Amartya Sen, “The Political Economy of Targeting,” in Public Spending and The Poor 11, 13 (Dominique van de Walle & Kimberly Nead eds., 1995). See also Jennifer Stuber & Mark Schlesinger, “Sources of Stigma for Means-Tested Government Programs,” 63 Soc. Sci. Med. 933 (2006); Daniel Hartley “Public Housing, Concentrated Poverty, and Crime,” Federal Reserve Bank of Cleveland Economic Commentary Number 2014-19, https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/2014-economic-commentaries/ec-201419-public-housing-concentrated-poverty-and-crime.aspx; see also the work of Lane Kenworthy.
An advantage of universal programs is political: If more (and wealthier) people see they have a vested interest in a program, it will have a better chance of enduring. Various (Republican) politicians have attacked Social Security, but they have all backed down in the face of public opposition.
Of course, making a program universal is not the only way to make it politically viable in the long run. Consider: How has the U.S. Department of Health and Human Services been able to shield food stamps (the Supplemental Nutrition Assistance Program, or SNAP) from budget cuts over the years? It hasn’t. Rather, food stamps is run by the U.S. Department of Agriculture as a program for promoting the sales of agricultural products–and is therefore defended by politically powerful forces.
But otherwise, Secretary Cohen is right: In the absence of having long-term political support, any program for the poor will become a poor program.
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