Judd W. Patton, Ph.D. (Biography) Bellevue University Online
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How to Answer Questions on Economic Policy - 
Without the Advice of Economists!

by
Dr. Judd W. Patton

     Are economists really necessary?  Should one listen to their forecasts or seek their counsel?

       It’s been said that one of the major achievements of economic forecasters has been to make fortune telling seem like science!  Even President Truman once remarked, “One can line up all economists back to back and they would still point in the wrong direction!”

       Yes, economists certainly have a credibility problem. Nevertheless, is it not reasonable to seek advice from these trained professionals so as to make intelligent, informed decisions on important economic issues facing the nation and world today?

      How can the non-economist know whether the Federal Reserve should conduct an easy money or a tight money policy?  What solution should be implemented to resolve the staggering Federal budget deficits?  Should the minimum wage be raised or lowered?  Should childcare legislation be passed?  Should Social Security be expanded or privatized? Should the U.S. adopt a national industrial policy?

     Perhaps economists are indispensable after all!  No, they really are not.

     The good news is that with the knowledge of only one fundamental principle, it is literally possible to answer virtually any economic policy issue.  Since the author is a credentialed economist, perhaps there is a trick up my sleeve.  No, the author means what he has said.  Let’s consider this key principle and judge for yourself whether this claim is valid or not.

Key Principle

     We live in a world of cause and effect.  Scientists continually strive to discover these regularities or relationships, known as laws or principles.  It must be true, then, that if an action or policy is right in principle, or is based on principle, it will work.  In other words success is assured.  That policy is bound to work!  On the other hand, if an action or policy is wrong in principle, it is bound to fail.  It is the wrong means to the attainment of the desired goal.

      Thus, for example, it was evident for decades that the Soviet Union’s economy was a disaster, the promises of its leaders notwithstanding.  Blinded by Marxist dogma they were unable to grasp that socialism, total government management of the economy,  was and is wrong in principle.  It can never produce anything other than economic chaos!  The $64,000 question today is: Have the former Soviet leaders learned that lesson?

       Again, in review, any policy that is right in principle is bound to work.  Any policy in defiance of principle is bound to fail.  How could it be otherwise?

       Now our key principle: Any economic policy that violates moral law is inherently flawed.  Alternately, any policy that is based on moral law is inherently bound to succeed. More specifically, any policy that is in defiance of the Ten Commandments, in either the letter or spirit of the law, is wrong in principle.  In short, only moral action leads to success.

       Simple, isn’t it?  It’s not necessary to seek out the advice of economists, just assess or ascertain the answer to the question: Does such and such a policy defy moral law or is it consistent with moral law?

       However, that assessment may be more difficult than it sounds.  It takes some insight to apply our principle in practice.  Let’s back-up for a moment.

       The source of this principle is from the Bible.  In it the Creator God reveals that He has set in motion active, inexorable spiritual laws that govern all human actions or relationships – whether economic, political, or social in content – to cause and produce all good (Deuteronomy 30:15-20).  These great spiritual laws reveal to humankind how to love God (the first tablet of four laws) and how to love neighbor (the second tablet consisting of six laws).  {See Matthew 22:37-39.}  To obey and live within these eternal principles is to bring about harmony, peace, economic prosperity, and liberty (James 1:25).  It is a way of life (Acts 24:14).  Living in defiance of these moral laws invariably exacts a price or penalty.  Indeed, many verses attest to this relationship between moral law and economic well-being (Job 36:11); Psalms 1:1-3; Joshua 1:8).

       All Ten Commandments have a bearing on economic affairs.1 Any socialist command economy, like that of the former Soviet Union or Nazi Germany, violates the very first commandment.  The state becomes omniscient and omnipotent – in place of the true Creator God!  This premise defies moral law.  It is wrong in principle.  It should not be surprising then that socialist or fascist economic systems lead to mass deprivation.

      Again, while all ten moral laws must be used to judge economic issues, the second tablet has the most direct application as it deals directly with man’s relationships with man.  Let’s practice applying just three of these moral laws.

The Eighth Law – “You Shall Not Steal”

     The eighth commandment informs humankind that stealing is wrong in principle.  All reasonable people, religious or not, recognize the beneficial nature of this law of human action (except locksmiths perhaps!).  In fact this law is foundational to the private property order, known as Capitalism or Free Enterprise, with its free markets of voluntary exchanges.  Unfortunately, many individuals and policy makers have twisted this law to read, “You shall not steal, unless by majority vote.”  Needless to say, morality does not depend on the opinion of the majority.  It is the same in public life as in private life, the same acting alone, in a group, or as a member of the body politic.2

      To illustrate the “democracy” principle, notice the Tale of a Coat cartoon in the article Welfare is Wrong In Principle.  Few people have any difficulty whatsoever identifying an act of charity or an act of theft.  But should government transfer or redistribute income in the name of some social good, many wrongly believe that such an action is an act of compassion and charity.  In actual fact, however, the act of taking income from a person who has earned it and “giving” it to another person who has not earned it, what may be called the Robin Hood principle, is contrary to the eighth commandment.  It is wrong in principle.  Surely the beneficiaries of the “booty” benefit, just as any thief would, but only at the expense of other victims.

      Understanding the above distinction makes it much easier to identify wrongheaded policies.

       President Grover Cleveland clearly grasped the evil effects of government so-called “charity.” Notice his 1887 statement of principle reproduced at the end of this article entitled, Why the President Said “No.”  He understood that if Representatives feel sorry for Texas farmers suffering in a drought, they should expend their own personal effort or income to relieve the suffering.  President Cleveland felt it was wrong in principle, since it tore down the national character by hindering or chilling out real charity, for Representatives and others to feel sorry for these farmers and use the political process to force taxpayers to relieve the farmers’ distress. All those supporting the legislation were not expressing real compassion. Their lack of personal help or charity for these farmers spoke louder than words.

      Robin Hood economic policies are not that difficult to identify. Redistributive transfer payments (often now deemed entitlements) are government outlays for which no goods are delivered or services rendered. Taxing Peter to pay Paul is noticeable in the policies of food stamps, public housing, farm subsidies, Medicare, Medicaid, Aid to Families with Dependent Children (AFDC), and even Social Security (current recipients were forced to contribute in the past but are paid by current income earners).  Regardless of the good intentions behind these transfer policies, each one is contrary to moral law.  Such programs cause a callousness among a nation’s people.  Their attitude becomes, “the government will take care of the hungry, the homeless, the farmers, the elderly, the children, the grandmothers.”  Such thinking destroys the bonds and love for fellowman.

       For those who might nevertheless fear eliminating these policies, please remember this truism: Our government can only “give” what it first acquires through taxing, borrowing, or printing money.  There is no such thing as a free lunch! Indeed, by removing a layer of bureaucracy, there would be more money available to address socio-economic problems.

      It should not be surprising that transfer programs, better termed legal plunder, evoke constant political strife and periodic crises while never solving the root problems. These programs are wrong in principle. Policies right in principle produce harmony, good fruits, and resolve the root causes.

The Ninth Law – “You Shall Not Bear False Witness”

      The ninth moral law prohibits lying and all fraudulent behavior.  It mandates truthful human relationships.  Again, it isn’t really that difficult to identify policies that distort or falsify economic reality.

      Obvious actions that defy this moral law would include rent controls, minimum wage laws, usury laws and farm price supports.  President Nixon’s 1971-72 general wage and price controls also come to mind.  Did this latter policy work?  On the contrary, it led to shortages of numerous goods, social strife, and even higher goods’ prices when the controls were phased out.

       While the author is trying to limit the use of economic analysis in this article, permit me to make one clarifying point.  An efficient, productive economy is absolutely impossible without a flexible price system with its profits and losses. It is essential to accurately communicate economic conditions of supply and demand for all goods and services to entrepreneurs and consumers alike. Falsifying prices, costs, and interest rates can only distort wise decision-making. Imagine the consequences had gasoline prices been frozen by decree in the United States when Saddam Hussein invaded Kuwait in August, 1990 – when world oil production was sharply disrupted.

      Here’s the scenario. Consumers would have enjoyed a temporary, short run benefit.  However, consumers would not have been given the signal to conserve fuel; producers would not have been given the incentive to produce more fuel; and alternative fuel research would not have been given further inducement. In short order there would have been massive shortages of gasoline. The economy would have disintegrated into a deep depression.

      Clearly, price controls defy moral law.

       Another type of price control, protective tariffs, were the crowning folly of the 1930s Great Depression.  The Smoot-Hawley Tariff Act raised U.S. tariffs to unprecedented levels to purposely hinder foreign imports.  But foreign nations retaliated. International trade contracted by almost 67%! The result was disintegration of the world economy as all nations are dependent and interdependent on other nations.

       Policies that lead to conflict and confrontation defy moral law. Protective tariffs are contrary to principle.

       Here is one last less-than-obvious example of a policy that defies the ninth moral law, price inflation.  Inflation, in fact, is an increase in the quantity of money issued by the Federal Reserve that causes higher prices. By a policy of easy money the Fed artificially pushes interest rates down. This economic drug at first appears to increase the supply of real savings. It does not. There are no additional resources available to expand national output. Nonetheless, some entrepreneurs are misled by the lower interest rates to embark on endeavors that cannot be completed because the land, labor, and capital are simply not available. Unprofitable investments and economic losses must result from easy money policies, guaranteed!

      Inflation, or monetary debasement, is fraudulent.  It defies the ninth law as well as others.  It wantonly redistributes income and wealth, causes higher prices generally, and causes the business cycle.  Once again the fruit of defying moral law is seen to be evil.

The Tenth Law – “You Shall Not Covet”

     The tenth commandment is comprehensive for all human actions.  It prohibits both the desire to take and the actual taking by fraud or deceit of that which belongs to a neighbor.3

      Many economic policies are motivated by covetousness or envy.  Continuing Federal budget deficits are an example. To live beyond our means year after year is surely an inordinate desire. It should be clear, however, that the chronic deficit problem can not be blamed entirely on the politicians. Rather Americans, each with their own special interests, have, as it were, their collective hands in the public trough. Politicians are simply endeavoring to give them what they want. By analogy, it’s as if each person is trying to reach his hand into his neighbor’s pocket!

       Covetousness is a cancer that destroys productive human economic relationships.  We encourage the reader to find his or her own examples of policies that defy this important moral law.

Conclusion

      Yes, one does not really need to seek the advice of economists on matters of economic policy. Naturally, a knowledgeable economist can add further depth of understanding. These economists should indeed be sought out!4  The bottom line is this:  If a policy or action is not moral, it will not work. It may take some special effort to learn how to apply this fundamental principle to economic life. But until sufficient people do, our economic problems will persist.

Footnotes

1 Hans Sennholz, Three Economic Commandments (Spring Mills, PA: Libertarian Press, Inc. 1990), p. 9.

2 Ibid., p. 27.

3 Ibid., p. 15.

4 For those who would like more detail and further analysis in applying the second tablet of the Law to economic life, we highly recommend Dr. Hans Sennholz’s 45 page booklet entitled, Three Economic Commandments. It can be purchased from Libertarian Press. Phone is: (724) 458-5861. E-mail: info@libertarian press.com

________________

Why the President Said “No”
(Grover Cleveland, February 16, 1887)

I return without my approval House bill No. 10203, entitled “An act to enable the Commissioner of Agriculture to make a special distribution of seeds in the drought-stricken counties of Texas, and making an appropriation of $10,000 therefore.”

I feel obligated to withhold my approval of the plan, as proposed by this bill, to indulge a benevolent and charitable sentiment through the appropriation of public funds for that purpose.

I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering that is in no manner properly related to the public service or benefit. A prevalent tendency to disregard the limited mission of this power and duty should, I think, be steadfastly resisted, to the end the lesson should be constantly enforced that though the people support the government the Government should not support the people (emphasis added).

The friendliness and charity of our countrymen can always be relied upon to relieve their fellow-citizens in misfortune. This has been repeatedly and quite lately demonstrated. Federal aid in such cases encourages the expectation of paternal care on the part of the Government and weakens the sturdiness of our national character, while it prevents the indulgence among our people of that kindly sentiment and conduct which strengthens the bonds of a common brotherhood.

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