Patrick Hedger writes for the Federalist that left-of-center policy ideas often deny basic principles of economic science.
Several major economic policy positions of the Obama administration fly in the face of widely accepted economic theories, even those taught in Economics 101. Just as Obama said in his press conference last week, “The market is very good about… allocating capital towards its most productive use.”
This is a fundamental economics lesson that people like Thomas Sowell, Milton Friedman, Friedrich Hayek, Ludwig von Mises, Adam Smith, and on have been trying to beat into the heads of those with political power for centuries in order to prevent things like taxpayer bailouts of major corporations, such as General Motors and Chrysler.
Of course, this didn’t stop Obama from giving billions of taxpayer dollars to the companies, which they could not otherwise earn by convincing people to buy their products. In short, the market was allocating resources away from unproductive uses (building cars and trucks nobody wanted), until the government under Obama and the Democratic Congress stepped in and said otherwise.
Many will point out that the auto companies survived following the massive cash injection, yet another fundamental lesson in economics, championed by Frederic Bastiat and later Henry Hazlitt reminds us to consider the seen versus the unseen. We see General Motors and Chrysler (the latter now under Italian ownership) still producing cars and trucks, yet we do not see what free Americans could have otherwise done with the billions of dollars taken from them and given to corporations who didn’t meet their demands.
What other companies could have filled the void? Would Americans have invested more in other forms of transportation? Would they have made investments in reducing their dependence on motor vehicles entirely and increased investments in thriving businesses such as Amazon and telecommunications companies that eliminate the need to leave the home for work and shopping altogether? Perhaps they would have simply just bought better cars and certainly more efficient cars.
