Tuesday, September 3, 2013

Are These Dueling Quotes?

As regards what even the least desirable person enjoys in a developed society, "We consider what a variety of labour is employed about each of them, we shall be sensible that without the assistance and cooperation of many thousands, the very meanest person in a civilized country could not be provided for."

Adam Smith (1723-1790)
from The Theory of Moral Sentiments
Ayn Rand suggests that only a few really contribute to the development of society, "The innovators lift the whole of a free society to the level of their own achievements.  The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time.  The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributing nothing to those above him, but receives the bonus of all their brains."

Ayn Rand (1905-1982)
from What Is Capitalism?

One of Adam Smith's most well-known thoughts was that free-market economies are led by an "invisible hand" which guides production and distribution of goods and services in their most efficient means, weaving zillions of people together, most unknown one to another, to provide the means.  Many provide and all receive.

And here Ayn Rand suggests that those zillions contribute little to the development of society overall, and receive the benefits of the entrepreneurs and thinkers in the world.  Few provide and all receive.

But what are the factors of production?  Only the thinking and idea development?  Or is it the utilization of land, labor, capital and entrepreneurship all interacting to make things happen and grow economies?

Each of those people who received and now rely on the most recent ideas, say all of the electronic Wifi devices on the market, may not have come up with the idea!  But each, in their own ways have somehow contributed to the economy as a whole, providing in their own ways the land, labor and capital that made a free, capitalist economy such that ideas could come to fruition.  And maybe even with a little entrepreneurship of their own to help bring those products to market in different ways.

Yes the innovators contribute!  Yes the rest of the population contributes!  And all receive.  Even Adam Smith's meanest people receive!  But the meanest of people can only receive if they had contributed something enough to the economy to have been rewarded with the ability to pay for those things they enjoy.

The innovators may not have their brains lifted to new levels by those below them.  But they live in the society as well and receive from others all the goods and services that make their lives comfortable, buying what things they want with the "material payments" they have earned to pay for them!

Free-market economies, capitalism itself, is the interaction of so many things they are unidentifiable.  Billions and billions of interactions happen on many continents to bring the simplest of things into our lives, things we rely on and take for granted.  And these things are brought efficiently, and for the most part cheaply.  Each good or service we enjoy has in itself created many, many jobs, to bring it to market.  Each of those jobs contribute to the efficiency and cost of everything economies do.


Why is it that when the gubment gets involved with providing this or that, history shows, things become more inefficient and expensive?  Because gubment cannot instigate all the billions of interactions it takes for economies to work!

When a politician says he will "create" jobs or "provide" this or that "benefit," it is only bloviating and smoke blowing!  It's economic ignorance on display!  Tell that politician to take an economics class!  Learn from economic history!  And to get out of the way!

The best way gubment can create jobs and provide this or that is by getting out of the way of economic development and growth, and create instead legislative tax and regulatory mechanisms to encourage the efficient use of land, labor, capital and entrepreneurs.

Adam Smith and Ayn Rand are not economists from different centuries dueling at all!  They are merely saying the same thing, from different perspectives!

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