Wednesday, July 27, 2011


The official stance of the Libertarian Party on the economy is as follows:

Libertarians want all members of society to have abundant opportunities to achieve economic success. A free and competitive market allocates resources in the most efficient manner. Each person has the right to offer goods and services to others on the free market. The only proper role of government in the economic realm is to protect property rights, adjudicate disputes, and provide a legal framework in which voluntary trade is protected. All efforts by government to redistribute wealth, or to control or manage trade, are improper in a free society. 

I must say, it is hard to disagree with that statement.  But just for fun, I will review some economic concepts and play devil's advocate for opposing points of view, if for no good reason other than to get our neurons fired up.  Without paining too many of you, here is a brief summary of Econ 101. (and yes I know how cliche that sounds)

Economics is all based on the interaction between producers and consumers in a market.  Consumer want is defined as Demand and producer offering is defined as Supply.  Demand is inversely related to Price, and Supply is directly related.  Higher prices mean that Supply is high (more producers want to sell) and Demand is low (less consumers want to buy).  Lower prices mean that Supply is low (less producers want to sell) and Demand is high (more consumers want to buy).  Equilibrium is the point at which Supply and Demand are maximized with the most consumers and producers willing to participate in the market.  Please consult the economic models below for a visual aid.
Pictured: Economic models

It is important to understand that the economy is affected by many things, including public optimism/pessimism, government policy, natural disasters, wars, and many other factors.  A government that extends its reach beyond that of Constitutional guidelines inherently costs more to taxpayers.  Taxation acts as a distortion to the market, though some argue that government spending supports the economy via contracts, public sector jobs, and improving infrastructure.

The only problem is that for every well-intentioned government program, the layers of bureaucracy and inefficiency are added to the cost, which is almost always a really bad return on investment.  Instead of an efficient market where people are allowed to vote with their dollars on the most competitive and best option, a politician or appointed official picks and chooses which contractors to hire and where to direct public funds, often for the benefit of special interests, not the country as a whole.  Do you think politicians know how to spend your money better than you?  I didn't think so.