Mechanical

Religionomics

OK, I'm getting sick of it. I am getting so tired of having asinine discussions with people about economics that I've decided it's time to coin a new word.

Religionomics: the study of people whose economics are based on faith rather than observation.

Here's a snippet of conversation I had with a Libertarian:

Ovid
Do you know what "market failure" is?
Him
It's when government interferes with the natural behavior of markets.

There are so many things wrong with that reply that I can hardly believe a rational person would say this -- and to be fair, most Libertarians aren't this brainwashed. We'll ignore the pejorative word "interferes" because that's just silly and designed to reinforce his belief system. Let's start with "natural behavior". What the hell is natural about markets? I give you some fruit I gathered and you give me a chicken you caught and that's natural, but economies can't survive on the barter system. As soon as you introduce financial instruments as a proxy for manual labor, the word "natural" is as natural as a nun in a whorehouse.

The problem with the above statement is simple. Rather than define a market and note what an example of failure would be under that definition, a particular action which might lead to failure is defined as the failure itself! Try it yourself. It's fun!

Well, OK, that last one is true, but not the others.

Here's another beautiful example, borrowed from Jacob's Libertarian Press (emphasis mine):

In his treatise on economics, Human Action, Ludwig von Mises illustrated how government intervention into free markets will always have effects counter to the ends such intervention is meant to obtain.

In other words, there is nothing the government can do to correct for market failures. The government, in this extreme view, is as impotent as the US Democratic party. On the off chance there is market failure, any government intervention can only make it worse. Of course, using terms like "always", "never" or "impossible", means that you're probably repeating catechisms rather than answering questions.

Laissez-faire proponents (Libertarians like the idea of laissez-faire whereby the government has virtually no power to intervene in the market) like to talk about Chile and Hong Kong and the tremendous success of their laissez-faire systems. What they don't like to talk about are the unique conditions under which these systems arose and sustained themselves. In Chile, the dictator Pinochet instituted a series of market reforms that abolished many taxes, destroyed trade unions, abolished the minimum wage and privatized many state assets. The economy grew tremendously, outpacing its neighbors, and is today one of the strongest and most robust economies in South America.

Of course, there's no such thing as a free lunch. Real wages fell, unemployment soared (they're getting it back under control), homelessness skyrocketed and the government incurred massive amounts of foreign debt. In the early 80s, the ill-regulated banking system finally collapsed and the economy went into a severe recession. And guess what? The privatized pensions were wiped out! Hear that Bush?

As for Hong Kong, it's long been considered the most free economy in the world. Labor laws are practically non-existent, taxes are low and free trade is widely practiced. Hong Kong is one of the strongest economies in the world. Of course, the laissez-faire proponents ignore the other bits. Education is free and mandatory (that's a little bit 'o socialism for you), housing has been strongly subsidized, the government's poured a lot of money into the infrastructure and it also owns all the land, leasing it out to business interests. Oh, and don't forget that the Hong Kong government pays for the bulk of health care costs. There's also a huge influx of tourist dollars, it's a trading hub in Asia and given the corruption and political instability of many surrounding nations, becomes a "port in the storm" for those wishing to do business in the area.

Hong Kong is also very polluted, has a quarter of their children living in poverty but is generally a pretty decent place to be if you ignore the Sword of Damocles that is China. Of course, I wouldn't worry too much about China as their leaders, though pretty brutal to dissenters, seem pretty pragmatic about the economic reality of Hong Kong.

So does Hong Kong prove that laissez-faire is the right way to go? Well, some might point to the highly successful Finnish model of socialism which has made their country such a wonderful place to live, along with one of the most economically secure, despite their heavy socialist leanings. People say "yeah, but Finland has special circumstances that make this work." Yeah, but so does Hong Kong.

In other words, Hong Kong has many unique circumstances which affect its situation and there's no guarantee that others can replicate its success. However, Hong Kong can serve as model which can show people a successful way of managing an economy. So can Finland, despite the fact that their systems are largely at odds with one another. Unfortunately, most don't care. People are indoctrinated into a particular set of economic beliefs and the idea that competing ideologies have merit is heresy.

What these debates often ignore is that different economic models tend to reflect different value systems. Do you value the individual over the group? Maybe laissez-faire tendencies suit you better. Do you value the group over the individual? Maybe socialist tendencies suit you better. Unlike religion, economics is something real. It's something we can truly examine, test, and possibly predict. But like religion, it's all too often a matter of faith rather than rational thought.

That's religionomics.

Update: so much for being clever. Seems I'm not the first person to use the term.

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You may not be the first to use the term, but you're third on the google result for it. That's something.