No Free Lunch

This video by Milton Friedman ought to be broadcast in every classroom in America. What it basically says is that in economics, as in life, you can’t get something for nothing. Despite this, there’s a very strong tendency for politicians-especially on the left-to try to peddle to people that they can’t provide them with something for nothing.  I suppose this is a natural outgrowth of the fact that politicians believe-perhaps correctly-that the electorate doesn’t want to be spoken to as adults, and so prefers to be pandered to as if they were children by telling them sweet fairytales.

Over the last few years we have heard, in many different countries, that we can tax businesses, impose rules and regulations, raise wages by Fiat, give workers all kinds of rights and privileges, print more and more money, subsidize this, unsubsidized that, etc., and when we implement these measures, we will only get benefits, and there will be no costs for doing so.  These measures may or may not be useful, but let us not fool ourselves that they do not come with a cost.

Let me give you an example. I personally believe that workers should have a decent amount of vacation time, for humanitarian reasons, and to keep up their productivity. But, I fully understand that if the state mandates minimum vacation times, that there is a cost that comes with that benefit. If a worker gets one month of paid vacation a year, essentially his wages for the rest of the year are reduced in order to pay for the one month that he is not working on vacation. It is as simple as that. I personally think it is worth it to take a hit in salary to be able to have some vacation time. But, I do understand that it’s not free.

This concept is something that I think a lot of people on the left do not understand. They just think that the good life and prosperity is simply a matter of government getting the will to mandate it through laws all kinds on workers “rights”, and everything will be fine.  All the government needs to do is make a law steadily raising worker salaries, and suddenly everyone will be prosperous.  And why stop there? Let’s go on and give workers long vacations, generous unemployment benefits and sick leave, reduce their working hours, create penalties for firing them, limits on what they can do while working, etc., etc. The net effect of all of this is that soon the workforce will become uncompetitive, and businesses will start shrinking, and thus firing workers. What will happen is that there will be a few very privileged workers, while the rest are unemployed. In other words, under the program of socialist “equality”, some people get all the benefits, when everyone else feels the pain.  Furthermore, overwhelmingly the well-established, the well-connected, the well-educated, white people, and older people tend to benefit disproportionately. Less skilled workers, the young, immigrants, etc., tend to be those that pay the price for the formers privileges. This is a situation with socialism in Spain, and most European countries. The socialist rules on labor, have reduced hiring opportunities, but made life more comfortable for the few who are lucky enough to get a steady job. Furthermore all the taxes on labor have simply reduced salaries.

The sense of getting something for nothing, can also be seen with the latest fashion of politicians to either print money, or deficit spend, to try and “stimulate” the economy. Why work hard, save, and restructured to be competitive, when all one has to do is print or borrow a bunch of money and go out and spend it? It sounds like one of those “miracle” diets, were the way to lose weight is to eat nothing but ice cream Sundaes.

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