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April 2017 Policy Study, Number 17-8

   

A Commentary on American Public Policy

   

Part 18

   

 

Still and all, why do these things added together foreshadow the certain destruction of government?  The fatal tendency of which Mr. Bastiat speaks isn’t necessarily enough by itself to destroy a government if it is limited to the individual or relatively small groups of people.  It is repugnant, to be sure, and dangerous, but it is not catastrophic to government for the following reason:  you have a relatively small proportion of the people satisfying their desires at the expense of the greater part, which is still able to produce enough to provide at least subsistence for the whole.  In fact, government is instituted among men to eradicate the activities of such a minority, or even a majority if it should become the case — although, as we currently see, government is unlikely to possess the fortitude to stifle this urge of the majority, in a democracy.

 

A much greater problem arises when it is through the agency of government that man enables himself to satisfy his desires with the least possible pain, at the expense of other men.  It is to this condition that Mr. Gramm and Mr. Bastiat speak.  In the former condition, we had the minority satisfying their desires at the expense of the majority; but this is sustainable.  In the latter condition, we have the majority satisfying their desires at the expense of the minority.  This is the condition of our nation at present.  Even this condition is possible to sustain for a period of time.

 

Eventually, however, there will come a point at which the minority will be unable to support the majority, even if they desired to do so.  As a practical matter, however, there is a point somewhere between the two extremes, a critical mass at which government will inevitably fail because the minority will simply throw up their hands and refuse to support the majority.  The minority will have reached the point at which they will no longer tolerate others (the majority) satisfying their desires at their (the minority) own personal expense.  Then the sweeping majority of people will decide to satisfy their own desires with the least pain at the expense of any and everyone else.  At this point, increases in production will cease.  The pie will no longer grow.  We will simply continue to reallocate and consume our already existing resources and reallocate and consume our remaining existing resources until there isn’t enough left to sustain us.  The time will have come to pay the piper for our foolishness.

 

There is a school of economic thought which holds that the economic pie is vibrant and dynamic, that it can and does continue to grow, and that anyone can have as large a piece of that pie as he is willing to produce.  Consider this:  if the economic pie is not dynamic, it would mean that we would still be tied to the economic pie that existed at the time Columbus discovered America.  Further, it would mean that the houses we live in today would have had to already exist at that time.  Do you know of anyone who lives in a house of that antiquity?  Every time someone uses his faculties to build a house, the economic pie grows.  This philosophy of economic behavior is most generally held by those of a more conservative nature, and this author subscribes to that philosophy.

 

Conversely, there is another school of economic thought which holds that the economic pie is static — that there is only so much economic pie ever available, and that it is simply divided up amongst us — that we merely continue to allocate, reallocate, and consume our already existing resources.  In other words, they believe that the economic pie behaves as a zero-sum game, and therefore anyone’s economic gain is necessarily someone else’s economic loss.  This philosophy of economic behavior is most generally held by those of the modern liberal nature.  These are the same folks who prescribe social insurance for us with government as the agency.  Do you suppose it is remotely possible that these folks who believe in a static economic pie do so because they subconsciously intuit that the social policies which they prescribe, policies that allow for largesse from the public treasury, policies enforced by government that allow some to satiate their desires at the expense of others, will eventually produce just exactly the variety of economic pie they envision?

 

There have been some rather bold statements proffered which suggest that using government as the insurance agency of last resort to provide the means of daily existence to its citizens will eventually cause the demise of said government.  It is only fair that the author explain in further detail why he believes this is true.  In order to do this, we need to take a quick look at a very basic economic principle and then apply it.  The economic principle in question is “supply and demand.”  As has been the prevailing custom in these writings, the first order of business is to define our terms.  There doesn’t seem to be much question in the understanding of the term “supply.”  In general terms, “supply” is simply the aggregate of all goods and services that are available for sale at any given point in time.  The understanding of the term “demand” seems to be somewhat more problematic.

 

There are those who believe that “demand” is the need for, or desire of, goods or services.  Neither the urgent need for nor the simple desire of goods or services directly translate into “demand.”  There is an additional factor that must be taken into account.  That is the matter of means.  The person or entity with the need or desire must have at their command the economic wherewithal to fulfill the need or desire.  Please notice that it was stated that they “must have at their command,” not “must personally possess,” the wherewithal.  (It is a distinction that will be addressed very shortly.)  As an example, suppose your current automobile has deteriorated to a condition of less-than-reliable transportation.  You now need a new car, and you desire a Cadillac.  Does this translate into demand for a new Cadillac?  Maybe it does, maybe not.  You might not have at your command the wherewithal to obtain a new Cadillac, or even a used Cadillac; but you might have the wherewithal to purchase a used Chevy van. For which vehicle is there a demand?  More than likely, it is for the van.  (At least, it was in my case.)

 

How can you have command of wherewithal?  We have already mentioned personal possession, and indeed that is the preferred form.  But it is also possible to obtain command of resources by borrowing them, or you may obtain command of resources in the form of a gift.  You may thus satisfy your desire directly by borrowing the car itself or receiving the car as a gift.  Or you may satisfy your desire indirectly by borrowing something else of equal value (bank loan), or receiving something else of equal value (a gift of cash from a loved one), either of which is now at your command and can be exchanged for the object of your desire.  That which is borrowed is temporary; a gift is permanent.  There is one other way to obtain command of wherewithal, and that is to steal it; but we should allow that that is entirely out of the question.

 

You may question if these four categories of acquiring wherewithal exhaust all potential possibilities.  The author confesses that he can’t be certain; but he has looked.  Take the instance of simply finding something.  If you find something to which no one has a prior claim, such as fish out on the high seas, you can help yourself, and it would fall into the category of creating with your own faculties.  On the other hand, if you find fish in someone’s private pond and you help yourself, that would be theft.  If you had permission to fish in the pond, then the fish would be a gift.  As far as the author is able to discern, all other specific methods of gaining wherewithal will fall into one or more of the four listed categories, depending on the specific circumstances surrounding the activity.

 

The upshot of the last few paragraphs is this:  the desire for goods or services accompanied by the command of an equal value of wherewithal to exchange for it equals demand.  Even so, it is important to remember that it isn’t necessarily imperative that the wherewithal used in the exchange actually be the possession of the person with the desire to be satisfied.  Other persons or entities can satisfy his desire for him, either directly or indirectly.  In any case, that still equals demand.  Short of theft, demand is always satisfied by the entity in command of the wherewithal.

 

   

 

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