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“…most important was the insight, key insight that Adam Smith had – brilliant insight – that wealth is not zero-sum, that you can make more of practically everything that’s important.
He understood this even while he was still living in a largely agricultural economy. He realized that because somebody is rich, that’s not what makes other people poor. Wealth is not a pizza where, if I have too many slices, you have to eat the Dominos box. My wealth does not create your poverty. Your wealth does not create my poverty. They’re separate questions. And we can generate more wealth.“
For several years now, I have used a variant on this quote as a signature on a sci-fi forum. “Your wealth does not cause my poverty. Failure to understand this is the basis of most bad economic thinking.” It’s a remarkable statement. Wealth is not a limited resource, it is highly renewable, like hydroelectric energy. The free market means that people can become rich without robbing anyone. This is not a trivial insight – it goes against how we think about most possessions.
Part of this comes from growing up in a nearly communist community, your family. Kids grow up in a group where people divide up resources according to the socialist mantra – “From each according to his ability, to each according to his needs.” This makes perfect sense when you have people who cannot take of themselves. (There’s not really a market for soiled diapers.) Even when kids make money on the side (paper routes, farm / yard work, babysitting, etc) they are still reliant on Mom and Dad. The authority figure has all the wealth, and they hand it out to their subordinates. The free market is completely different.
The free market does not need love or loyalty like a family. If I want to make money, I need to make something customers will buy, even if I hate them. People will be motivated to work to provide something if people are willing to pay for it. This only works if people are able to turn a profit. If you exchange money for something, it will remain largely renewable, while outright seizing property is a one and done deal. Have fun looting the Walgreens, since that will be the last you see one nearby. This is why the Goose Laying Golden Eggs is such an amazing fable – greed can break a system that would otherwise produce wealth beyond imagining. (A lord of Adam Smith’s time would likely trade his lands and title for my spare bedroom and its contents.)
All this came to mind when I saw P. J. O’Rourke’s take on millennials and socialism. Like always, his writing is incredible – it’s like the drunken stand-up comic version of Thomas Sowell. The remarkable thing is that socialism and similar schemes are actually doomed to despair outside of utopian science fiction; you will eventually run out of wealth to spread around. Far from a utopia, it encourages a dystopia; either you need to find someone else to loot, or reduce the number of mouths to feed. Only the capitalist free market allows for a future of abundance and plenty.
So teach your children and young people who will listen to the basics of free-market economics. That way, they will how to keep the goose making golden eggs in exchange for food. Otherwise, our goose is cooked.Published in