By Walter Williams
MOST PEOPLE THINK THAT ECONOMICS IS DIFFICULT, but it's really simple.
More than anything else, economics is a way of thinking. Knowing just
a little bit of economics can save us from the tricks of political
hustlers.
At the heart of economics are a few simple and easy-to-comprehend
rules -- it's not rocket science. Our first rule is there's a cost
to everything. To obtain more of one thing requires the sacrifice of
something else. Nothing is free.
You say: "Hold it, Williams. Aren't there free public libraries and
schools, and free medical care?" Consumers of these services might
enjoy them at a zero price, but that doesn't mean they're free. If
expenditures weren't made for public libraries, schools and medical
services, those resources would be available for something else.
That "something else" sacrificed
is the cost of public libraries, schools and medical services. The
main issue about so-called free services
is which Americans are going to be forced to pay for them. The moral
or Christian principle says the person who enjoys them should pay.
But if we accept the standards of thieves, we don't care who pays as
long as we enjoy it.
Another basic rule of economics is the law of demand. That's just
an observation about human behavior, namely: The higher the price (cost)
of something, the less we take of it. The lower the price (cost), the
more we take of it.
For example, if nothing else changes and the price of oil falls,
we can expect to see greater use. People might travel more, purchase
more gas-guzzler cars and be less motivated to insulate their homes.
When oil prices rise, they do just the opposite.
When interest rates fall, people invest more and purchase more homes.
When rates rise, they do the opposite. There are no known exceptions
to the law of demand, even though political hustlers want us to believe
there are. For instance, politicians want us to believe that when higher
minimum wages are enacted, employers will hire the same or more low-skilled
labor in response. They want us to believe that when they raise taxes,
people will be just as honest in reporting income as they were before.
Psycho-babblers want us to believe executing murderers, sending more
criminals away for a longer time and concealed-carry laws had nothing
to do with today's reduction in crime. Criminals also respond to the
law of demand. When crime's cost to criminals rises, they'll do less
crime.
If it weren't for the fact of scarcity, there'd be no economic issues.
Scarcity simply means we all want more of something, but there are
not enough resources on Earth to satisfy every want. That means we
must find a way to determine who is going to get what's available.
For example, even if Rolls Royce built 100,000 cars a year, I'm betting
that of the Earth's 6 billion people more than 100,000 of them would
like to have one. That means there must be a way to decide who gets
the cars. We could compete through violence, but the preferred method
has turned out to be the market mechanism --- whomever's willing to
bid the highest price.
Some people piously announce there shouldn't be any competition.
That'd be nice, but scarcity requires a mechanism to decide who gets
what. That applies to everything. For instance, there's only one Williams.
Mrs. Williams had to compete with other women for my hand in marriage.
She triumphed at the expense of other women, who were forced to do
without.
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