economics

Allow People To Interact

Dave Davis Commentary, Policy, The Long Journey to "More", Uncategorized , , , ,

All the noise about the Elon Musk-led Department of Government Efficiency (DOGE) lopping off unneeded chunks of the Federal Government and the horrified response by the big government-favoring progressive left got me thinking about what the purpose of Government is in the modern world and how we can match it to those goals.

My take on the question will shock and horrify others, but hear me out. The purpose of modern Government is to provide the structure for free and open markets to thrive. These markets are another way of saying people can freely and safely interact.

Markets are the best way to allocate resources to better the human condition. Nothing, including the various forms of socialism, mercantilism, feudalism, or tribalism, has lifted humanity more than free and open markets. If you don’t accept this, I urge you to read “Super Abundance.” As the structures necessary for markets to thrive expanded, humanity’s living standards have dramatically improved, even as its numbers have grown.

The reasons for market superiority aren’t hard to find. Billions of people using the latest information will arrive at better decisions and make them quicker than the relatively few elites in Government. In the information age, this advantage only grows.

Markets are the most democratic form of choice. People vote for their preferences. These are hard choices because their money is involved rather than theoretical. We are all human, so markets make mistakes momentarily but self-correct as new information enters the continuous exchange. We invest funds to receive a proper return. If the profit potential leaves, so do we.

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Time Waits For No One

Dave Davis Commentary, Policy, Uncategorized , , , , , ,

While we await the election, the world moves forward. Wars keep spreading. The administration continues its mission to prevent this, but we have the opposite. Ukraine seized Russian territory. In the Middle East, Lebanon is aflame, and Iran is taking blows.. Now, North Koreans have entered Russia, apparently to bolster the Ukrainian front. The conflict containment policy has failed.

Kamala Harris says she wouldn’t change anything. Are we looking at the same wars? While we wait for direction from whomever wins the Presidency, our friends have suffered. At every step of the way, the U.S. put obstacles in the way of the Ukraine, and Israel to deal their foes attitude changing blows. Aggression is best met by a solid and painful response. If it isn’t, the attacker has no reason to desist. When we forget this simple fact, we promote more bad behavior. Lawbreakers paying little price or no price leads to more crime.

Now we have Turkey bombing the Kurds. Remember them? They are the ones who filled the combat role in our victory over Issis. A terrorist attack on military base caused the Turkish action, even though there is no proof it was the Kurds.

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Working Towards Decline

Dave Davis Commentary, Policy, Uncategorized , , , ,

Two happenings this week show how far we’ve traveled from reality. The vice-presidential debate and the East Coast Longshoreman Strike may have little in common, but both evidence an archaic way of thinking. The idea that we can stand in the way of progress in a way that saves everyone’s present job has never worked out in practice. Pursuing such a program with an expanding wage scale is madness.

From Diocletion’s Roman Empire to China’s Qing Dynasty, stopping time by government fiat only resulted in decline. Yet both vice presidential candidates claim they can preserve and bring back manufacturing jobs. J.D. Vance hews to Trump’s tariffs to protect otherwise unprofitable businesses. At the same time, Tim Walz would continue massive subsidies and tariffs to do the same.

The East Coast longshoreman demanded a considerable wage increase and banned further automation. With its potentially severe economic consequences, this strike is a stark reminder of the dangers of resisting technological progress. The Luddites in the U.K. in the early 19th century, who violently opposed technological change and rioted over the introduction of new machinery in the wool industry, would seem to be a strange model to follow. There appears to be a settlement with a significant wage increase, but we don’t know about automation. It’ll be interesting to see the final draft.

Both presidential tickets employ industrial policy methods of protection and subsidies, disregarding the fundamental economic concepts of “Comparative Advantage” and “Opportunity Cost.” Some countries possess advantages that enable them to produce goods more economically. Understanding these concepts is not just important; it’s empowering. It’s the key to making informed economic decisions and fostering growth.

Understanding and applying the principles of comparative advantage is crucial for economic growth; it’s a beacon of hope. Canada could grow dates in greenhouses, but countries with a favorable climate can send them to Canada at a much lower price. On the other hand, wooded Canada has lumber unavailable in date-producing desert nations. Dates for the lumber trade leave everyone with more. Adhering to these principles has allowed billions of people to live better than ever, and continuing to do so can lead to even more prosperity.

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Inflation Hurts And The Pain Will Continue

Dave Davis Commentary, COVID-19, Policy, Stopping Inflation, Uncategorized , , , ,

Democratic Politicians and allied media, echoing some economists like Paul Krugman, paint a rosy picture of our economy. They question why we’re less content while supposedly outperforming other nations. Catherine Rampall, the Washinton Post economics columnist, tells us, “Nearly everything Americans believe about the economy is wrong, according to a recent Harris-Guardian poll. And that’s pretty much everyone’s fault.” This narrative implies that our dissatisfaction is unfounded. But is this the whole truth? Are there no deeper economic issues that we need to address?

After a lifetime of talking to people about their finances, I have gained a profound understanding of how people assess their financial well-being. In most cases, having a growing amount left over at the end of each month tells them whether they’re just subsisting or can think of the things that make life worth living—a vacation, maybe with your family, or a better house. Whatever your dream, it always requires money. Unless you have discretionary income, you can’t fulfill it, whatever it is.

When every basic bill, from rent to utilities and insurance, elicits a gasp, even a raise can’t alleviate the feeling of being trapped. The necessities of life, like food, transportation, and clothing, become burdens, and dreams start to fade. This situation is actual for many hardworking Americans struggling to make ends meet.

While economists discuss prices and wages, the reality is far more complex. Your pay may rise, but your grandpa’s and grandma’s income may be more fixed. Where they could pay their way in the past, now they need help to meet their rising bills. You thought you had the kid’s education covered, only to find a widening gap. These stark realities are not just isolated incidents but the daily norm for more people. No wonder those telling us how well we’re doing only get blank stares.

Inflation is the source of most of our angst, but if you feel future inflation isn’t dangerous, steps to rein it aren’t topping your to-do list. Everybody seems to be waiting for the Federal Reserve to lower interest rates, which presupposes inflation is under control. How likely is this situation to be accurate in the future?

The classic definition of inflation is “too much money chasing too few goods.” We have to borrow when revenues don’t cover our government’s expenditures. If we dump ever-growing amounts of debt on the market and the Federal Reserve fails to intervene, ever-rising interest rates will be required to find buyers. Already, we pay more on our debt than on defense. In the future, the payments will crush the entire budget. This crisis is not a distant possibility but a potential economic catastrophe that we must address:

Of course, the Federal Reserve can buy the debt with money created out of thin air. This course of action is how we get runaway inflation: one way or another, overspending results in the unkindest tax inflation.

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