Tuesday, May 12, 2009

Economics in Two Paragraphs

This short passage was written by Turgot as a summary of the thought of Vincent de Gournay (who coined the phrase "laissez faire et laissez passer"), Together, the two, in a fact that makes obvious the absurdly false dicotomy of US one party politics, made up a significant intellectual force of the "Left Wing" or "Liberals" of early revolutionary France. In the following excerpt, Turgot makes a few things abundantly clear:

"The general freedom of buying and selling is therefore the only means of assuring, on the one hand, the seller of a price sufficient to encourage production, and on the other hand, the consumer, of the best merchandise at the lowest price. This is not to say that in particular instances we may not find a cheating merchant and a duped consumer; but the cheated consumer will learn by experience and will cease to frequent the cheating merchant, who will fall into discredit and thus will be punished for his fraudulence; and this will never happen very often, because generally men will be enlightened upon their evident self-interest.

To expect the government to prevent such fraud from ever occurring would be like wanting it to provide cushions for all the children who might fall. To assume it to be possible to prevent successfully, by regulation, all possible malpractices of this kind, is to sacrifice to a chimerical perfection the whole progress of industry; it is to restrict the imagination of artificers to the narrow limits of the familiar; it is to forbid them all new experiments; it is to renounce even the hope of competing with the foreigners in the making of the new products which they invent daily, since, as they do not conform to our regulations, our workmen cannot imitate these articles without first having obtained permission from the government, that is to say, often after the foreign factories, having profited by the first eagerness of the consumer for this novelty, have already replaced it with something else. It means forgetting that the execution of these regulations is always entrusted to men who may have all the more interest in fraud or in conniving at fraud since the fraud which they might commit would be covered in some way by the seal of public authority and by the confidence which this seal inspires, in the consumers. It is also to forget that these regulations, these inspectors, these offices for inspection and marking, always involve expenses, and that these expenses are always a tax on the merchandise, and as a result overcharge the domestic consumer and discourage the foreign buyer. Thus, with obvious injustice, commerce, and consequently the nation, are charged with a heavy burden to save a few idle people the trouble of instructing themselves or of making enquiries to avoid being cheated. To suppose all consumers to be dupes, and all merchants and manufacturers to be cheats, has the effect of authorizing them to be so, and of degrading all the working members of the community."

– Turgot, "Éloge de Gournay" (1759), translated by P.D. Groenewegen

When you subsidize failure, you create incentives to fail, and when you penalize the successful to create those subsidies, you remove the incentive to succeed. If you protect people from the ability to commit failure, you remove the ability and necessity for them to learn, and penalize those who do, creating an entire culture of fail.

1 comment:

Jay21 said...

Whoa, whoa, whoa… You’re not advocating personal responsibility in a free market system are you? Haven’t you seen that is what got us into this mess? I mean come on the increased oversight of the deregulation of an overstaffed regulatory commission appointed by a blue ribbon panel can’t have over looked the idea that we, as mere civilians are capable of choice. Not the easy breezy which button to push to order our prepackaged, super duper discounted value meal on the order by number menu choices, but real choices such as “I do not like his store or prices, I will not shop there.” I don’t know, you are pushing an anarchistic chain of events here. I mean if we all had a real choice how would legislators keep their jobs? Hell how would the power, coal, and telephone company’s stay in business, let alone the bastion of good ideas Amtrak? Seriously we had a choice; planes, trains, buses or cars; we choose and they have shown us that rail is not only better; it is the “future.” You’re crazy. Quoting some old guy, come he could not have had any idea what we are facing today…or maybe if we followed his simple principles we wouldn’t see this sh!t today. Dammit the past rings true again. Great essay Reverend.