Friday, December 02, 2005

Ten Commandments of Economics


1. Self-interest drives us to do good things for others while striving to do well for ourselves.

2. Profit is good because it drives people to invent, innovate, and invest in new and better products and services.

3. Incentives matter: Just as self-interest and profit drive progress, taxes and welfare stifle it.

4. Only slaves and dupes can be exploited. (Wal-Mart employees are not exploited because they are not forced to work at Wal-Mart; anti-Wal-Mart activists are exploited because they're dupes of the anti-business Left.)

5. There's no free lunch, all costs must be covered by prices or taxes.

6. The appearance of a free lunch (e.g., government's assumption of risk for retirement savings, company-subsidized health insurance) leads individuals to make bad decisions (e.g., not saving enough for old age, overspending on health care).

7. Paternalism is for children; when adults aren't allowed to make economic decisions for themselves they don't learn from mistakes and can't pass that learning on to their children.

8. All costs matter; one cannot make good economic decisions by focusing on one type of cost, such as the cost of energy.

9. There best way to deal with pollution and the "depletion" of natural resources is to assign property rights in resources now held in common. The owners of a resource have a vested interest (a) in caring for it so that it remains profitable, and (b) in raising its price as it becomes harder to obtain, thus encouraging the development of alternatives.

10. Discrimination is inevitable in a free society; to choose is to discriminate. In free and competitive markets -- unfettered by Jim Crow, affirmative action, or other intrusions by the state -- discrimination is most likely to be based on the value of one's contributions.

11. Voluntary exchange is a win-win game for workers, consumers, and businesses. When exchange is constrained by regulation, someone loses, namely, the worker (fewer jobs and lower wages) and the consumer (higher prices and less freedom of choice).

12. Absent force or fraud, we earn what we deserve, and we deserve what we earn.