The Snarky Economist

You have to read Thomas E. Woods’ deliciously snarky response to an economic illiteratista who dubs himself “Che.” Che’s commentary is in bold, and his fisking by Woods follows.

If free market principles were allowed to rule, like Schiff wants, what that means is everything is based on maximizing profit.

At this point we are all supposed to gasp at what a terrible prospect this would be. After all, the track coach and Michael Moore have told us about the wickedness of “profits,” so what more is there to say, really?

But as we’ve seen above, profit is simply society’s way of ratifying a firm’s past production decisions. It indicates what consumers want, and (by the process of imputation) the best process for producing it. Profits attract further investment in a given line of production, until the increased supply of goods in that industry brings the rate of return there back down to the level that exists elsewhere in the economy. This is how we ensure that our limited resources are not wasted, and that the most urgently desired goods are produced.

In the absence of profit as a driving force, how exactly would Che like to see resources allocated? We can either allow consumer preferences to guide production, or let the personal preferences of a monopolist (i.e., government) dictate what should be produced and how. When the question is posed this way, the choice is pretty clear, which is why the question is never posed this way.

Incidentally, would Che prefer to base economic decision making on maximizing losses instead? Would that be better?

There is so much more you have to read. Che was dumb, in his own way, but it was a completely different way than Che the Bloggista.

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