Friday, December 26, 2008

Legislators and Outcomes Are Not as Intended

Steve Gilbert posted on the Sweetness and Light Blog (26 December), "What Has Been Obama’s Plan All Along?" HERE:

It should come as no surprise, then, that we have a tendency to take our free-market system as a given, to assume that it flows naturally from the laws of supply and demand and Adam Smith’s invisible hand. And from this assumption, it’s not much of a leap to assume that any government intrusion into the magical workings of the market— whether through taxation, regulation, lawsuits, tariffs, labor protections, or spending on entitlements—necessarily undermines private enterprise and inhibits economic growth. The bankruptcy of communism and socialism as alternative means of economic organization has only reinforced this assumption. In our standard economics textbooks and in our modern political debates, laissez-faire is the default rule; anyone who would challenge it swims against the prevailing tide.

It’s useful to remind ourselves, then, that our free-market system is the result neither of natural law nor of divine providence. Rather, it emerged through a painful process of trial and error, a series of difficult choices between efficiency and fairness, stability and change. And although the benefits of our free-market system have mostly derived from the individual efforts of generations of men and women pursuing their own vision of happiness, in each and every period of great economic upheaval and transition we’ve depended on government action to open up opportunity, encourage competition, and make the market work better

I pass over the subject of the post about Obama; it is not relevant to my comments on the above two extracted paragraphs and I do not comment onm politcs in other countries.

The political economy summed in the extracts is only the media’s version of Adam Smith, who never linked his chapters on supply and “effectual demand” to anything to do with the metaphor of “an invisible hand” (only mentioned once throughout Wealth Of Nations). Nor was Adam Smith linked to ‘laissez-faire’ in his lifetime; he never used the words and, if anything, considered those who used them, such as the French Physiocrats in the 1760s, were too extreme in their ambitions for commercial economies.

Adam Smith never flinched from swimming “against the prevailing tide” (neither does Lost Legacy on these matters.) Hence , I am pleased that the first sentence of paragraph two, “It’s useful to remind ourselves, then, that our free-market system is the result neither of natural law nor of divine providence”, is so clear and unequivocal.

Why? Because the advocates of myths about Adam Smith and laissez-faire and invisible hands, quite often go on the link him to “the magical workings of the market”, a wholly superstitious assertion.

Markets did emerge “through a painful process of trial and error” but not via “a series of difficult choices between efficiency and fairness, stability and change”.

True, individuals may have made choices, but wholly without any ‘system’ of ‘equity, fairness, stability, and change’ in mind. All those sorts of assertions are a post-event reconstruction by ideologues.

As is the idea that “government action” opened up “opportunity”, encouraged “competition”, and made “the market work better”, which is so contrary to historical fact as to be breathtaking.

Elizabethan governments certainly intervened with 'good' intentions – to increase the pace of commercial changes in 16th century – but in almost (I may have missed some) every case the result of their legislative interventions (The Statute of Apprenticeships – for ‘quality’; the town Guilds – to ensure regular supplies of produce to consumers; and the Settlement Acts – to curb local burdens from beggars and ‘welfare’ scroungers) was the opposite and unexpected because they removed competition and didn’t increase it; the Guilds restricted competition and raised monopoly prices; and instead of settling people these laws prevented it.

Legislative intentions are processed by people and people have interests that can and do work against the intentions of the legislators, giving the legislators the benefit of the doubt for the sake of the argument (I reserve judgment on the intentions of those who influence them).

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