Progressives Are Declaring War on Basic Economics

The United States is fighting wars on multiple fronts. Aside from our involvement in Ukraine and the Middle East, a hot war is being waged against economics. This war is being championed by the progressives in the Democrat Party, backed in large part by left-wing sociologists and political scientists. Progressives deny basic economic principles and theory. They deny that incentives matter, that markets work better than government dictates, that scarcity and opportunity costs exist, that the laws of supply and demand are operative, that benefit-cost analyses have merit, and that economic efficiency makes consumers and producers better off.

Incentives matter. Remove penalties for looting and carjacking and more looting and carjackings occur. Establish sanctuary cities and free college tuition for illegal immigrants and expect increased flows of illegals crossing the border. Increase compensation for the unemployed and more unemployment occurs. To deny that incentives matter is to deny inductive and deductive logic. Progressives admittedly march to the music of a different logic. What the tune is isn’t clear.

Scarcity means that resources are limited. Getting more of something requires having less of something else. Economists call the best alternative use of resources its “opportunity cost.” Larry Summers, the well-respected Democratic economist and former secretary of the treasury, wondered if the billions of dollars proposed to be given to individuals who have college debt might be better spent elsewhere (or perhaps not spent at all). His question was roundly ignored by progressives.

Understanding opportunity cost is essential for rational decision-making. Imagine a family operating without regard to opportunity cost. Little Sally might be given her heart’s desire while the rest of her family goes without food. No rational family would operate like this. Nor should any nation.

Government commands destroy the benefits from markets. Progressives despise markets. Markets privately allocate resources based on supply and demand through which the costs of production and consumer preferences interact to set prices and efficient levels of output. Progressives think markets produce the “wrong” things. The old Soviet Union and Chinese command economies announced “five-year plans” that dictated the production of nearly everything (including the number of nails). Shortages, inefficiency, and economic stagnation followed. Thinking that the geniuses in Washington know best how to allocate resources will set us on the same road.

Economic efficiency raises living standards. Progressives think “efficiency” is a dirty word. They either don’t understand the concept or choose to neglect it because it interferes with support for their public-policy whims. Economic efficiency incorporates a number of basic concepts, and an important one is to avoid producing something that costs more in resources than the value of the final product. Markets generally take care of this. If progressives want something, they don’t care how much it costs or how wasteful it is. Take the Green New Deal, for example.

If progressives deny economics, what criteria do they use for decision-making? They rely heavily on the vaguely defined concepts of diversity, equity, and inclusion. Sen. Bernie Sanders, a self-acknowledged socialist and progressive, was recently asked by Bill Maher to define equity. He was stumped. It is best not to define terms that will get you into obvious contradictions. Take the proposed forgiveness of college debt. How does this square with the diversity, equity, and inclusion criteria? It more than smacks of a crass giveaway to buy votes.

The University of Michigan sociologist Elizabeth Popp Berman acknowledges the war against economists and their way of thinking. In her book, Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy, she claims that economists are the chief obstacles to achieving progressive policies. She hopes that the progressives in Congress will be joined by “a range of experts and activists including economists not committed to the economic style [of thinking].” However, is it reasonable to call someone who does not think like an economist an economist?

To be clear, economists can disagree on public policy. But the economic way of thinking allows for a rational debate. Professor Berman is correct that the economic way of thinking has been a chief obstacle to progressive policies. It has saved us from traveling down F. A. Hayek’s “road to serfdom.”