The Fundamentals Still Apply

Scott Sumner reminds us that economic fundamentals still apply in a piece at Econlib:

1. Price controls are bad (whether on wages, prices rents or interest rates.)
2. Large budget deficits are bad, even if interest rates are low at the time.
3. Persistent inflation is always and everywhere a monetary phenomenon.
4. Free market economies do better than statist economies. Emulate Denmark, not Argentina.

I don’t think he means that last sentence. At least I hope so or that he means it only in part. Denmark is 86% ethnic Danish (down from 96% 50 years ago). The United States has never been 86% anything including American.

In the piece he provides some good examples of how those thing are true along with this observation:

But what about global warming? Didn’t something need to be done? Here it’s worth noting that the approach most favored by economists (a carbon tax) would have actually reduced our budget deficit. That would have been the logical approach. Instead we went with a set of open ended subsidies that boosted the budget deficit. Even worse, we favored local producers over imports, even if imported goods could address global warming more effectively. We were told that global warming was such a big problem that we could no longer rely on a free market economy, but then implemented mercantilist policies that prioritized subsidizing domestic special interest groups over addressing global warming.

Apparently global warming was merely a pretext for industrial policies that were being implemented for other reasons.

That’s my problem with today’s politics generally. A tremendous number of things are being advocated for reasons other than their own merits and possibly for personal gain. Some deviate so far from their own merits one can hardly escape concluding they’re being espoused for gain.