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Defending the free market
Gerard Jackson
At recent mass I attended I was struck by the priest’s sermon in which he managed to confuse economics with theology. It brought to mind an exchange I had with a Uniting Church minister sometime ago which ended rather badly for him. (It really is depressing the number of clerics of all denominations who know nothing of economics and yet freely attack it from their pulpits). Robert Bryce, a local left-winger, felt impelled to continue the exchange on behalf of the good reverend.
Now Bryce’s defence merely parroted our journalists’ persistent interventionist attacks on free-markets economics. Unable to refute free market analysis these socialists of the media frequently resorted to abuse and gross misrepresentation, declaring that economics is not scientific and free-marketeers are just “fundamentalists”, “extremists” and “ideologues”. Of course, when these journalists are challenged to defend their allegations they suddenly become unavailable.
Mr Bryce attacked economics as unscientific, asserting that it is “too imprecise . . . it has a history of accepted theories one day, later on becoming heresy”. This is not an uncommon charge and has been paraded in some media quarters as the coup de grace to economic theory. Yet only someone utterly ignorant of the history of economic thought and the progress of science could make such a silly statement.
One only has to think of the phlogiston, ether and preformation theories, for example, to realise that modern science has discarded much of what was once accepted by the scientific community. This is part of the process by which science has progressed. Nevertheless, left-wing journalists still mindlessly parrot their anti-market shibboleths. Moreover, precision is not science. This always brings to my mind Heisenberg’s uncertainty principle which operates in the world of subatomic particles. It was this world that drove Einstein to state: “God does not play dice”.
Defining science in terms of precise measurements is incredibly naive. As the brilliant physicist Richard Feynman put it, science progresses by informed guesses. Anyway, as a social science economics deals with complex phenomenon known as human action. it should be obvious that the methods (especially the mathematical ones) of the natural sciences are not applicable to economics. James Clerk Maxwell made this distinction clear when in 1877 he wrote that “physical sciences” is often applied “in a more or less restricted manner to those branches of science in which the phenomenon considered are of the simplest and most abstract kind, excluding the consideration of the more complex phenomena such as those observed in living things”
Now I have frequently blamed the unions for much of our unemployment. Mr Bryce, like so many journalists, asserted that blaming unions is “simplistic”. Not so. Unions, supported by sympathetic or intimidated Governments, raised the cost of labour above the market clearing value of its product . This is what caused our widespread persistent unemployment. If labour had not been overpriced the Hawke Government would have had no need to use the Accord as a cloak behind which it was hoped inflation would price people back into employment by surreptitiously cutting labour costs. Nevertheless, journalists still went to considerable lengths to exonerate unions of all responsibility for their actions while still blaming free-market economics for unemployment.
Only by increasing the amount of capital invested per head of the population can we raise living standards. It is because South American countries failed to do this that their populations live in extreme poverty. Argentina’s living standards, for instance, once equalled Australia’s and its unions were just as strong. But Peron’s “pro-labour”, interventionist policies wrecked the economy and impoverished the people.
In 1958 Cuba’s per capita income was nearly twice that of Spain and Japan while greatly exceeding that of Austria and Ireland. All the leading economic and social indicators for 1958 place Cuba as a first world country. But within a short time of making himself dictator Castro turned the Switzerland of Latin America into a socialist slagheap protected by parasitic thugs. All of this with barely a peep from European social democrats. It is ironic that the most successful South American economy today is Chile, the economy that deregulated the most.
In keeping with his naive socialist beliefs, Mr. Bryce asserted that energy resources are more efficiently conserved and used under state control. (This was in response to my attacks on state control of industry). This was just another confirmation of the inability of socialists to face reality when it contradicts their primitive social and economic views. These people need to be constantly reminded that it was the ideological belief that the state knows best that turned Central and Eastern Europe into a colossal cesspit that wasted enormous amounts of natural and human resources. Without a doubt, the market is always more efficient than the state, i.e., politicians and bureaucrats, in the use and conservation of resources.
Bryce finished with the lamentation that the privatisation of Victoria’s electricity supply had ended subsidies for solar research. But these subsidies were politically and not economically motivated; a means of directing taxpayers’ money into green pockets via expenditure on solar energy in the hope that it would quiet them. In other words, the subsidies were bribes.
Unfortunately, power companies have continued the practice, spending shareholders’ money on worthless solar projects in the hope of buying brownie points from greens. Even worse, the Bracks Government is wasting hundreds of millions of dollars on grossly inefficient solar plants and wind farms. This is the same mob that cannot even maintain Melbourne’s water supply. It seems that Bracks and Co attended the Castro School of Economics. What else could explain their stupidity and incompetence?
Gerard Jackson Brookes’ economics editor
BrookesNews.Com
Monday 26 February 2007