The Economics Lesson Obama Needs to Learn

By:  Sheldon Richman
07/25/2013
       
The Economics Lesson Obama Needs to Learn

President Obama is again turning his attention to the elusive economic recovery.

His “pivot” will be for naught, however, as long as he continues to ignore two important points: first, government is a major squanderer of scarce resources, and second, its regulations are impediments to saving and investment.

We live in a world of scarcity. At any given time our ends outnumber the means to achieve them. Hence we economize so that we can achieve as many of our ends as possible. Resources, labor, and time devoted to one purpose can’t also be used for other purposes, and the alternative forgone is the true cost of any action. We individually choose among competing ends after assessing the trade-offs, because we don’t want inadvertently to give up something we prefer in exchange for something we don’t value as much.

The marketplace, when it’s free of government privilege and regulation, lets us accomplish this to a remarkable degree. In doing so, it raises our living standards and creates an orderly environment, thanks to the price system, which coordinates and facilitates our plans.

Government throws this process out of whack. When politicians forcibly extract resources from us (through taxation) and borrow, they leave us less with which we can improve our lives through entrepreneurship, business formation, and the like. But, you may ask, aren’t the politicians’ projects worthwhile? Actually, many government projects are of zero value or worse. The costly global empire is beyond useless: it endangers us. Other projects might be useful, but — and this is key — we can’t be sure, because they are not subject to the market test.

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