Anti-Free Market Economics based on Emotion not Reality

The biggest problem for free market advocates has always been that the policies we espouse do not play well with the peoples’ emotions.  After all, what sounds better to you?  “Recessions are economic downtowns made necessary by the mal-investment of the preceding phony Fed induced boom” or “We are going to put people back to work by spending money on public works projects building badly needed infrastructure”. 

Now, if you or someone you love is unemployed, the last thing you want to hear is that the government is not going to do anything to get the economy rolling again.  But, as all proponents of the free market know, that is precisely what is required to liquidate the bad investments caused by government policy in the preceding boom and get our economy moving again.

So it is with President Obama’s proposal to raise the minimum wage from its current $7.25 level to $9.00 an hour.  It is all emotion over reality.  For his part, the President touts his plan as helping the working class achieve a livable wage.  And who isn’t for that?

But the reality is that the minimum wage will actually cause more unemployment among the very people Obama claims he wants to help.  Studieshave proven that, but really all one needs to know is how supply and demand works – as the price of a good or service rises the demand for that good or service diminishes.  Thus, by raising the price of the introductory wage an employer can offer, demand for wage earners at that new higher level will be less than at the old lower level.  Employers will hire fewer employees and require existing employees to do more.

But, I suppose when raising the minimum wage causes more unemployment, the anti-free market types will be there to provide unemployment benefits to the jobless.  They will use emotion to tell us that needed medications will not be had, children will starve, and families will be in the streets without it.  Anyone who stands in the way of extending benefits hates the poor, the workers, minorities, women, and children.  Forget that it was the policies of the anti-free market types which destroyed the economy in the first place and produced high unemployment.

At the end of the day, economic policy should have nothing to do with emotional pleas for government to do something.  When government does something it ends in harming those it was meant to help.  Has government involvement in the health care industry provided a system that is accessible to all?  Has the Community Reinvestment Act, Freddie Mac, and Fannie Mae served homeowners well?  Do we have first rate schools because of the Department of Education, energy independence because of the Department of Energy, or an abundance of jobs in America despite heavy regulation to protect workers from Washington? 

Washington’s record in managing the economy is abysmal.  Economics is a logic based science.  The sooner Americans realize that the sooner we can rid ourselves of anti-free market schemes and heal our economy.     

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina