Brain Food

February 12, 2012 by Don Watkins

One of the themes Yaron and I focus on in our work is the way in which philosophic ideas, and especially moral ideas, shape economic policy. In this speech, president Obama explains how the Christian morality, which says we are our brother’s keeper, underlies his leftist policies.

This Wall Street Journal piece by economist Arnold Kling covers much more than jobs and our current financial woes. It’s also a must-read take on the nature of markets. Kling talks about these ideas in more depth here.

There are so many things wrong in this New York Times piece by Robert Frank you would think it was written by Paul Krugman. But I expect this to become an anticapitalist talking point, so it’s still worth reading. Two points in response. First, note the premise that taxing the rich reduces their personal consumption. Now, it’s certainly the inalienable right of successful Americans to consume wealth they’ve earned, but in fact what higher taxes on the rich tend to reduce is not their consumption but their savings, i.e., their investment capital. As Ayn Rand points out, savings and investment are the stock seed that an industrial economy needs to grow. Second, behind the article’s seeming economic sophistication is a pretty simple claim: government “elites” know how best to dispose of your wealth, so don’t complain when they confiscate it. But your wealth belongs to you, and if it is wrong for others to take it, it is doubly wrong for them to take it in the name of making you better off.

Another popular anticapitalist canard claims that America has been following free market policies the last thirty years and that the result has been stagnation for everyone except a few rich people, who are growing even richer at our expense. The basic error is the totally wrongheaded notion that the last three decades have seen anything resembling a free market. Just to take one axis: entitlement spending has increased every year since 1980—despite the fact that Americans were growing richer during that time. But as economist Don Boudreaux argues in this video, even the stagnation claim doesn’t hold water. Americans are doing better today than they were a generation ago. Of course, if we had had free markets during that time, our standard of living would have increased incredibly faster.

In case you missed it, Fox News carried an article I wrote for Ayn Rand’s birthday. One of the things I wanted to counter was the widespread view that Rand’s political ideas are basically negative: get rid of this government program, that regulation, this entitlement. Instead, I wanted to stress how she was after something positive: she supported free markets as an ideal that protected the rational, independent, industrious individual.