Tag Archives: free market

Economic Myths #9 – Social Safety Nets


It is often trumpeted as a virtue that “civilised”, social democratic countries offer their citizens one or more types of “social safety net” in an attempt to eliminate the most dire effects of, say, unemployment, illness or some other kind of incapacity that could inflict a condition of extreme poverty upon the individual members of the citizenry. The idea is that the most basic wants will always be guaranteed by the state should one be unable to provide them for oneself and no one need have any fear of hunger or lack of shelter – situations that are said to be “intolerable” in a modern, twenty-first century society.

The first problem with this theory is that poverty is not some selectively appearing disease that makes a magical appearance every now and then to infect an otherwise healthy and wealthy society. Rather, poverty is the natural state in which human beings first found themselves. When Adam and Eve were expelled from the Garden of Eden they saw that the world was a barren and harsh place that is capable of providing precious little – may be just air to breathe – without the conscious effort of its inhabitants. The only way to alleviate this terrible situation is for humans to work to produce the goods that they need and, eventually, to bring about capital investment in order to expand the amount of consumer goods that can be enjoyed – whether it’s cheap food, housing, education, holidays or whatever – a process that only really got underway in any significant form in the 1800s. Read more

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Economic Myths #7 – Government means Harmony


One of the aspects of capitalism and the free market that the typical lay person finds difficult to comprehend is the fact that the complex structure of work, production, distribution, and trade could possibly take place without some kind of centralised, directing authority in order to co-ordinate everybody’s efforts. Wouldn’t there just be chaos and mal-coordination with everyone trying to make their own, independent plans if there is nobody at the tiller to steer the giant ship?

This fallacy stems from the belief – accentuated by holistic concepts such as aggregate, pseudo-statistics like “GDP” or “the national income” – that what we refer to as “the economy” is some kind of enormous machine that has “input”, with a single operator “processing” these “inputs” into “outputs”.

In fact, rather than being one giant, amorphous blob “the economy” is made up of millions and millions of independent, unilateral acts of production and two-way trades, many of which will never have anything to do with each other. I may sell an apple to my neighbour for 10p in London; another person may sell an orange for 20p to his neighbour in Manchester. Neither of the two pairs of people has ever met, nor need any of them have any involvement with the exchange of the other pair; and yet both exchanges would be regarded as part of “the British economy” in mainstream discourse. Read more