By Mark Hornshaw
“Economics studies human choice under scarcity. Humans must act in the present to provide for the future. Informed choice relies on market data in the form of prices—specific prices for specific things, as we assess various different means to satisfy our ends—that is what economics is about.
Macro-statistics such as GDP and CPI, whether they are rising or falling in the aggregate, do not help much with this vital task. These statistics are compilations of vast amounts of data to come up with averages across entire countries and time-periods. It’s a dilution of the data, not an enhancement.
” “What a country wants to make it richer, is never consumption, but production. Where there is the latter, we may be sure that there is no want of the former,” said John Stuart Mill, citing Say’s law.
In a tune of rapid change and disruption, we need prices to do their job more than ever so the entrepreneurial process can work. High prices show which industries to move more resources into, and low prices show which ones to move resources out of to free them up for more urgent uses. From the point of view of consumers, high prices show us what we should cut back on, and low prices show where we can pick up bargains.
This process takes time. Interfering with this process just locks in shortages and surpluses.
So-called “stimulus,” just thrown at “the economy” to increase “aggregate demand” in the abstract, cannot work, when there are supply constraints in some industries and prohibitions in others.
Government policy should be on mending holes in the social safety net, compensating those it has forced out of business and jobs, and reducing the tax and regulatory burden it places on businesses, workers and consumers as they try to adjust.
These are all microeconomic responses to relieve suffering and remove impediments.”