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February 21, 2015

Fundamental Concepts - The Market Prevails [Weirddave]

So much of leftist thought is magical thinking - the idea that because they wish something to be so then it will be so. That's Obama's entire foreign policy right there. Unfortunately, reality has a way of insisting upon itself, but this doesn't stop them from trying to reshape it to their desired ends. It never works, and nowhere is this as obvious as in leftist economic theories.

The market is a very simple concept, based upon supply and demand. If people demand something the market will move to supply it. The price of the item will be determined by how well the market meets the demand, the better the job it does, the lower the price for that item will be. If the market oversupplies an item, outstripping demand, the price will fall to zero. If demand is higher than supply, prices will rise. Efficiently meeting a demand results in profit for the supplier, and this is the gas that makes the whole engine go. It's breathtaking in its simplicity, and yet complex beyond human understanding in its scope. If you leave it alone it will (generally speaking*) meet all of the needs and desires of humanity.

This drives the leftist into a froth. Where is this market? He demands. Who controls it? Who programmed it? How do suppliers know what to provide? How do people know what to buy? His first instinct, as always, is to control. The market by definition can't be controlled, because it is intangible. It is the Spiritus Mundi of billions and trillions of individual daily human interactions with the world and with each other. Asking who controls the market is like asking how many angels can dance on the point of a pin. It's meaningless.

A leftist refuses to accept this, so he tries to control the market. This is impossible. All he can do is distort the market, but no matter how much he thinks he is controlling it, the market is always working correctly as if his machinations didn't exist. The market simply works around them.

Here's an example. Suppose you have a town of 100 people, one of whom is a cobbler. He makes 10 pairs of shoes a year and charges $10/pair for them. (in a free system, this has to be the case. If there were more demand for shoes either a second person would become a cobbler or shoes would cost more) For whatever reason (The children, it's always for the children), the leftist determines that shoes "should" cost $5, so he fixes the price at $5. Now, assuming the cobbler doesn't change trades because his income has just be arbitrarily slashed (the leftest passes a law mandating that he continues to work lest he go to jail. Hey, look, he just invented slavery), the 10 pairs of shoes he produces are not bought by the 10 people in the village that need shoes that year. No, they are bought by the first ten people who get a chance, because they have the opportunity to get a $10 commodity for $5. Suppose half of them would have bought shoes anyway. From their POV they got a deal. The other 5 turn around and sell their shoes to the other 5 people who would have bought them before, but they sell them for $15/pair (Hey, look, a black market arises!). The supply has been interrupted by the leftist interfering in the market, so the demand causes prices to rise (the 5 people who missed them on sale still need shoes, so they pay more to get them). At the end of the year, however, the 10 people who need shoes have them, and they paid an average of $10/pair to get them.

Now, that's obviously massively simplified, and I made the numbers work out neatly, but that IS the way the market works, and nothing any person or agency can do will stop it. Multiply that times a billion and throw in billions of different commodities and it's easy to see that as the leftists tries to regulate each transaction he'll screw the entire thing up so that the economy doesn't work at all. Still, deep down, on the individual level, the market is still functioning.

*That's not to say the market should be unregulated. The proper role of government in a free market is referee. Set rules to ensure that the playing field is level, enforce them and arbitrate disputes. Other than that it should stay the hell away.

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posted by Open Blogger at 11:05 AM

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