By Zaldy Dandan – Variety Editor
THE French economist Frédéric Bastiat (1801-1850) believed that most individuals are competent economists when managing their households. They use common-sense economics in their decision-making. They know how to budget their limited resources by balancing income and expenditures. They are aware of costs, benefits, and trade-offs.
For example, as consumers we are always on the lookout for bargains and good deals. When we need professional help, we don’t choose someone merely because he lives on the same street or in the same village — we choose the person with proven experience, competence, and whom we can afford to hire. If we need certain goods, we will not, as a rule, attempt to make them ourselves just to keep our money from “leaving” the household. That would be a colossal waste of time and effort. Instead, we stick to our day job, get paid for it, and then go to a store to buy what we need. To quote Dave Chappelle, “I wanna wear Nikes. I don’t wanna make them!”
For Bastiat, this practical wisdom stands in stark contrast to the imprudent and short-sighted economic policies often promoted by governments. Sadly, we seem to believe that because it is government, it can defy arithmetic. But this is like believing in a Superman who cannot fly — who has, in fact, no superpowers at all except the ability to impose taxes and enforce compliance through its monopoly on legally sanctioned force.
And because government is run by politicians who must pander to voters — often catering to irrational expectations just to get elected — we end up with economic policies that are as popular as they are nonsensical. Why? Because many voters want government to do many things for them while also recommending restriction after restriction on the private sector — government’s primary source of revenue and designated scapegoat for the failures of ill-advised policies.
Nowhere is this more evident than in the widespread belief, shared by many politicians and voters, that a trade deficit should be avoided — that exports are good but imports are bad.
Picture the consequences if we applied this logic in ordinary life. (The following dialogue was inspired by economist Donald J. Boudreaux’s recent essay.)
We go to our favorite barber, who has been cutting our hair for decades, and accuse him of being a rip-off artist — someone who has been taking advantage of our kindness.
“What do you mean?” the barber asks.
“I’ve been patronizing you all these years, but what do I get from you?”
“A haircut?”
“Okay, but what do you buy from me?”
“What do you sell?”
“Well, I don’t sell anything, but still!”
“But you get a haircut in return for the money you pay me. And I assume you appreciate it, otherwise you wouldn’t come here every month.”
“Whatever. From now on I’ll cut my own hair.”
And the same person goes to his favorite supermarket, clothing store, restaurant, karaoke bar, and auto shop to tell them how they have consistently exploited him — and that henceforth he will be self-reliant and make everything he needs, which will make him richer because he’ll get to keep most, if not all, of his money.
If all that sounds ridiculous, it’s because it is. Most of us are deeply grateful to the stores and shops we patronize for providing what we want when we want it. All we have to do is go there, place an order, and pay for it. Again, imagine having to grow or catch our own food. Build our own house. Make our own clothes and footwear. Create our own means of transportation or communication. That was how life was for many people in the past.
The real wealth of a nation, as Adam Smith had argued in the 18th century, consists of its goods and services, not its money supply. “Too many people have yet to grasp the full implications of that, even in the twenty-first century,” Thomas Sowell wrote in “Basic Economics.” “If the goods and services available to the…people are greater as a result of international trade, then [they] are wealthier, not poorer, regardless of whether there is a ‘deficit’ or a ‘surplus’ in the international balance of trade.”
We don’t feel cheated when we spend money on the things we need. We understand that we are exchanging pieces of government-printed paper for things we value. Otherwise — and this is the beauty of trade — we simply wouldn’t buy them.
People only trade when they believe they will benefit — the very opposite of zero-sum thinking.
And yes: even the best barbers don’t cut their own hair.
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Zaldy Dandan is the recipient of the NMI Society of Professional Journalists’ Best in Editorial Writing Award and the NMI Humanities Award for Outstanding Contributions to Journalism. His four books are available on amazon.com/.
